The document discusses using the IS-LM model to analyze the effects of monetary and fiscal policy. It provides diagrams demonstrating how:
1) Expansionary fiscal policy shifts the IS curve to the right, increasing output, while contractionary fiscal policy shifts it left, decreasing output.
2) Expansionary monetary policy shifts the LM curve to the right, lowering interest rates and increasing output, while contractionary monetary policy shifts LM left, raising rates and reducing output.
3) Fiscal policy can be partially or completely crowded out by higher interest rates, reducing its effectiveness in boosting output. The degree of crowding out depends on how sensitive investment and money demand are to interest rate changes.