Question

a: How does an increase in the tax rate affect the IS curve?b: how does the increase affect the equilibrium level of income?
c: how does the increase affect the equilibrium intrest rate?​

Answer 1

Answer:

The increased demand for cash shifts the LM curve up. This happens because at any given level of income and money supply, the interest rate necessary to equilibrate the money market is higher. The upward shift in the LM curve lowers income and raises the interest rate.