Business, 22.08.2020 19:01 gavianacandelar8522

Consider a variant of the IS-LM model studied in class, where Investment, I = I0 + b1Y - b2r, and the demand for money, L(r, Y) = m0 + kY - hr. We know with certainty that a tax increase must cause which of the following? a. a decrease in the interest rate and an ambiguous effect on investment.
b. an increase in the interest rate and an upward shift in the LM curve.
c. no change in output if the Fed simultaneously pursues expansionary monetary policy.
d. a decrease in the interest rate and an increase in investment.

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Consider a variant of the IS-LM model studied in class, where Investment, I = I0 + b1*Y - b2*r, and...

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