One policy response to the U.S. economic slowdown of 2001 was tax cuts. This policy response can be represented in the IS-LM model by shifting the ______ curve to the ______.
A) LM; right
B) LM; left
C) IS; right
D) IS; left

Question

Quizplus · Accepted Answer

Tax cuts increase disposable income, leading to an increase in consumption and investment. This is represented in the IS-LM model by shifting the IS curve to the right, as it reflects an increase in aggregate demand.

One Policy Response to the U