Problem 3. Analyze the general equilibrium effects of an increase in taxes. Illustrate your answer with a graph. Organize your answer by discussing (1) Does the change shift the IS curve and/or the LM curve? (2) How does the change affect the equilibrium interest rate and output? (3) Describe the effect of the change with your own words by focusing on the changes in the composition of GDP. Does the change shift the IS curve and/or the LM curve? How does the change affect the equilibrium interest rate and output? Describe the effect of the change with your own words by focusing on the changes in the composition of GDP.

Problem 3. Analyze the general equilibrium effects of an increase in taxes. Illustrate your answer with a graph. Organize your answer by discussing (1) Does the change shift the IS curve and/or the LM curve? (2) How does the change affect the equilibrium interest rate and output? (3) Describe the effect of the change with your own words by focusing on the changes in the composition of GDP. Does the change shift the IS curve and/or the LM curve? How does the change affect the equilibrium interest rate and output? Describe the effect of the change with your own words by focusing on the changes in the composition of GDP.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.4P

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Question

Problem 3.
Analyze the general equilibrium effects of an increase in taxes. Illustrate your answer with a
graph. Organize your answer by discussing (1) Does the change shift the IS curve and/or the
LM curve? (2) How does the change affect the equilibrium interest rate and output? (3) Describe
the effect of the change with your own words by focusing on the changes in the composition of
GDP.
Does the change shift the IS curve and/lor the LM curve?
How does the change affect the equilibrium interest rate and output?
Describe the effect of the change with your own words by focusing on the
changes in the composition of GDP.

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