A tax cut financed by an increase in the money supply
1. will shift the LM curve to the right in
the long run if there is full employment and flexible exchange rates.
2. will shift the IS curve to the right
somewhat if there is less than full employment and fixed exchange rates.
3. will reduce equilibrium money holdings
if there is full employment because it represents a tax on holding
money.
4. will do all of the above.
Choose the correct option.