Suppose there is a reduction in expected future taxes.This will cause which of the following to occur?
A)the IS curve to shift left in the current period
B)the IS curve to shift right in the current period
C)the LM curve to shift up in the current period
D)the LM curve to shift down in the current period

Question

Quizplus · Accepted Answer

A reduction in expected future taxes increases consumers' expectations of their future disposable income, leading to an increase in current consumption and investment. This boosts aggregate demand, shifting the IS curve to the right in the current period.

Suppose There Is a Reduction in Expected Future Taxes