An you suggest how his statement could be modified

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Reference no: EM13154459

In explaining the 2003 bill to cut taxes, Presodent Bush is quoted as saying, "When people have more money, they can spend it on goods and services."

a. In the IS-LM model, will a tax cut change the money supply in the economy? Does a change in the money supply shifts the IS or the LM curve?

b. In the IS-LM model, does a tax cut shifts the IS or the LM curve? Your answer must clearly state which curve shifts

c. Based on your answer 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 teh IS-LM model?

Reference no: EM13154459

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