A decrease in the effective tax rate on capital would cause the IS curve to
A)shift up and to the right.
B)shift down and to the left.
C)remain unchanged.
D)remain unchanged if taxes are fully deductible from income; otherwise, shift up and to the right.

Question

Quizplus · Accepted Answer

A decrease in the effective tax rate on capital increases the return on investment, thus stimulating investment and shifting the IS curve up and to the right.

A Decrease in the Effective Tax Rate on Capital Would