A change in government tax policy that increases government tax collections

Question

Quizplus · Accepted Answer

An increase in government tax collections typically reduces disposable income, leading to a decrease in consumption and investment. This results in a leftward shift of the IS curve, as it represents a decrease in goods market equilibrium at any given interest rate. The LM curve, which represents money market equilibrium, is not directly affected by changes in tax policy.

A Change in Government Tax Policy That Increases Government Tax