slide 44 IS LM Model Biswa Swarup Misra Some IS Exercises 5How would the IS

Slide 44 is lm model biswa swarup misra some is

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Some IS Exercises 5.How would the IS react to increases in tax rates in aneconomystrugglingtorecoverfromaprolongedrecession? Or how would an economy, nervously eyeingan approaching slowdown, react to tax increases?
slide 45 IS-LM Model Biswa Swarup Misra Some IS Exercises The IS curve in these circumstances experiences a "double whammy" caused by increasing taxes at a time when the economy is exceedingly vulnerable to adverse macroeconomic policy. The intercept term falls as fragile consumer and investor confidence plunges, and the slope gets steeper due to the increase in the tax rate as discussed, with IS shifting from IS o to IS 1 The opposite may also hold true. The euphoria generated by a perfectly timed tax-cut may cause the confidence terms to soar, lifting up the intercept, and causing the IS to flatten.
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slide 47 IS-LM Model Biswa Swarup Misra Factors Affecting Slope of IS Curve Slope of IS curve Value of f Slope of IS curve High Flat Low Steep Value of MPC Slope of IS curve High Flat Low Steep Value of t Slope of IS curve High Steep Low Flat Value of Multiplier Slope of IS curve High Flat Low Steep