Use the IS—LM model to determine the effects of each of the following on the general equilibrium values of the real wage, employment, output, the real interest rate, consumption, investment, and the price level

(a) Tougher immigration laws reduce the working-age population. (b) There's increased volatility in the prices of stocks and bonds. (c) The government tries to achieve tax equity by an increase in the corporate tax rate. (d) Increased computerization reduces stock market brokerage costs.

(a) The decline in labor supply increases the real wage and reduces employment and output, shifting the FE line to the left. The LM curve shifts up and to the left as the price level rises to restore equilibrium. As a result, the real interest rate rises, reducing consumption and investment.
(b) Real money demand rises, which shifts the LM curve up and to the left. To restore equilibrium, the price level must decline, shifting the LM curve down and to the right. There's no effect on any other variable.
(c) The higher tax rate reduces investment, shifting the IS curve down and to the left. To restore equilibrium, the LM curve shifts down and to the right as the price level falls. As a result, the real interest rate declines, so consumption increases. There's no change in the real wage, employment, or output.
(d) Increased liquidity on nonmoney assets reduces money demand, shifting the LM curve down and to the right. The price level rises, to restore equilibrium by shifting the LM curve back up and to the left. There's no effect on the other variables.