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In explaining the 2003 bill to cut taxes

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3. 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."
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? Demonstrate this using a graph. 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: EM13540033

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