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Answer to Question #220438 in Macroeconomics for Parinthapa
Question #220438
“Increase in the tax rate causes shift in the position of the IS curve.”— Discuss the statement with arguments.
Expert's answer
The LM curve is shifted when taxes are raised. The economy travels along the IS curve, not the IS curve shifts. When the money supply rises, the demand for money should rise in order to preserve equilibrium.
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