A tax cut shift the is or the lm curve

Reference no: EM13522369

33. In explaining the 2003 bill to cut taxes, President Bush is quoted as saying, "When people have more money, they can spend it on goods and services." (4x3=12pt)
a) In the IS-LM model, will a tax cut change the money supply in the economy? Does a change in the money supply shift the IS or the LM curve?
b) In the IS-LM model, does a tax cut shift the IS or the LM curve?
c) Based on your answers in a and b, how can you reconcile the president's statement with economics? Can you suggest how his statement could be modified to be consistent with the IS-LM model?

Reference no: EM13522369

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