05 Jun Question According to the Keynesian IS-LM model, what is the effect of each of the following onoutput, the real interest rate, employment, and the price l
Question
According to the Keynesian IS-LM model, what is the effect of each of the following onoutput, the real interest rate, employment, and the price level? Distinguish between the short runand the long run. Be sure to express graphically and explain in words.
(a) Increased tax incentives for investment (the tax breaks for investment are offset by lump-sumtax increases that keep total current tax collections unchanged).
(b) Increased tax incentives for saving [as in Part (a), lump-sum tax increases offset the effect ontotal current tax collections].Summer 2015Econ 2102
(c) A wave of investor pessimism about the future profitability of capital investments.(d) An increase in consumer confidence, as consumers expect that their incomes will be higher in the future.
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