a) The consumer expenditure in economy is mainly due to higher inflation, where consumer have high income due to increased money supply. There are three major ways to restrict the money supply in the economy.A lower money supply then shifts the IS curve to left operating s low level than its initial equilibrium point.

(i) Fiscal policy- The government controls the money supply by government spending e.g subsidies, and taxation in economy.

(ii) Monetary policy- The federal government can also control the money supply in economy through Monetary policy which include coins, paper money, bank deposits by individuals and businesses in the economy. The bank can control the money supply by changing the interest rates of the banks.

(iii) Exchange rates - The money supply and valuation of country's currency is also dependent on imports and exports in the economy. The federal government can also change the exchange rate to control the money supply in the economy.

b) The tools we discussed above are the ways government can use to lower the consumer expenditure in the economy. Now, we discuss how exactly each tools to be changed to lower the consumption.

In fiscal policy, the government can decrease the money supply by reducing its expenditure in the economy e.g it can decrease the amount of subsidies given on essential products. Also by increasing tax rates in the country, people will be left with less amount of money to expend.

In monetary policy, the government can increase the minimum reserve requirements for banks to limit the loans and borrowings and this will decrease the income and consumption level in the economy.

The exchange rates also have impact on money supply in the economy. More exports in comparison of imports lead to flow of more money supply in the economy. Thus the federal government can increase the exchange rates by increase in the valuation of domestic currency.

c) The interest rate in the economy have inverse relationship with consumer expenditure which means higher interest rates will lead to lower expenditure and lower interest rate will result in higher consumption. To lower the C that is consumer expenditure, the government has to lower the money supply and to lower money supply, it has to increase the interest rate. So, this is again clear that interest rate will increase if government wants to lower the money supply in the economy.

d) A lower interest rate and consumption expenditure will have direct impact on expenditure in the economy. As we knoe IS in the economy will have 4 main factors that is C+I+G+NX, decrease in all such factors leads to decreased demand, unemployment and hence lowet Output in the economy. Thus, GDP will contracts from its intial equilibrium point.