Suppose individuals now believe that there will be a future tax increase. This increase in expected future taxes will cause which of the following to occur in the current period?
A) the LM curve to shift down
B) the LM curve to shift up
C) the IS curve to shift rightward
D) the IS curve to shift leftward
E) none of the above
D
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Discuss the options for financing a balance of payments deficit
What will be an ideal response?
Crowding out occurs by: a. causing reduced government purchases of goods and services
b. reducing the value of the multiplier used for government purchases of goods and services by increasing the interest rate. c. reducing the value of the multiplier used for government purchases of goods and services by increasing the marginal propensity to consume. d. reducing the value of the multiplier used for government purchases of goods and services by decreasing the marginal propensity to consume. e. causing reduced imports of goods and services.