Consider two alternative programs for contraction. 1- Removal of an investment subsidy 2- Rise in...

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Consider two alternative programs for contraction. 1-	Removal of an investment subsidy 2-	Rise in income tax rates Use the IS-LM curve model and the investment schedule to discuss the impact of these

Robert · Accepted Answer

Answer----1
Either a removal of an investment subsidy or an increase in the 
income tax rate will shift the IS- curve to the left. This will lead to 
decrease in income and the interest rate. However, the effects on the 
composition of GDP and on the investment schedule are not quite the 
same.
Answer----2
An alternative measure of expansionary fiscal policy that may be 
adopted is the reduction in taxes which through increase in disposable 
income of the people raises consumption demand of the people.

Consider two alternative programs for contraction. 1- Removal of an investment subsidy 2- Rise in income tax rates Use the IS-LM curve model and the investment schedule to discuss the impact of these

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