What happens to the strength of a fiscal stimulus when the central bank holds the money supply constant?  Explain

 

?When money supply is held constant, when we have fiscal stimulus in place, we will have lower strength of fiscal policy as a result of crowding out of private investment.

When we have a situation where Money supply does not increase when we have fiscal stimulus , the investment savings curve will shift outwards in the IS- LM mode, here the LM curve will remain constant, when we have a shift to the right of the IS curve will lead to an increase in the interest rate. This results to crowding out of private investment, when money supply is Increased after fiscal stimulus, it leads to a downward in the increased interest rate to the original level. This means we won't have crowding out and with highest  effect of fiscal stimulus on output in the Economy