Answer to Question #48146 in Macroeconomics for Sarah
2- The government has been running deficits for the past year and decides it must balance the budget, so it increases taxes to $1.2 billion, Explain how this changes the IS curve?
2. The last determinant of slope is the tax rate. An increase in the tax rate reduces the slope of the aggregate demand curve.The flatter aggregate demand curves produce an IS curve that is steeper as a result of the increase of the tax rate.
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