Answered: Suppose policy makers decide to reduce…

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Suppose policy makers decide to reduce the tax rate. Show this in an IS-LM(policy rule) graph.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 17SQ

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Laffer Curve Analysis

In terms of economics, the Laffer curve was popular among those economists who were or who belonged to the supply side of the economic peripheral. This concept was popularized by the famous supply-side economist known as Arthur Laffer. This curve illustrated the relationship between the tax rates and government revenue. It is already known that the tax which the public or individuals residing in an economy bear is the revenue or income of the government with the help of which the government does all the necessary works in the society, which is beneficial for the economy.

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Suppose policy makers decide to reduce the tax
rate. Show this in an IS-LM(policy rule) graph.

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