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Answer to Question #70710 in Macroeconomics for john

Question #70710
Suppose Korea's new government increased VAT by 5% point. Explain the effect of tax increase using a D and S curves. Show how would this D and S change result in IS-LM analysis.
Expert's answer
If Korea's new government increased VAT by 5% point, then the tax increase will cause the decrease in supply, so the S curve will shift to the left causing increase in equilibrium price and decrease in equilibrium quantity.

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