Changes in the macroeconomy

Reference no: EM13679911

Consider the following changes in the macroeconomy. Show how to think about them using the IS curve, and explain how and why GDP is affected in the short run. Use both equations and graphs to answer this question.

a. The government offers a temporary investment tax credit: for each dollar of investment that firms undertake, they receive a credit that reduces the taxes they pay on corporate income.
b. Improvements in information technology increase productivity and therefore increase the marginal product of capital.
c. A housing bubble bursts, so that housing prices fall by 20% and new home sales drop sharply.

Reference no: EM13679911

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