One policy response to an economic slowdown is to cut taxes. 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

Cutting taxes increases disposable income, leading to higher consumption and investment, which shifts the IS curve to the right in the IS-LM model.

One Policy Response to an Economic Slowdown Is to Cut