Use the IS-LM Model to Illustrate Graphically the Impact of the Pigou

question 57

Essay

Use the IS-LM model to illustrate graphically the impact of the Pigou effect on the equilibrium level of income and interest rate during the Great Depression, when prices were falling.

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Definitions:

Nontaxable Social Security

Portions of Social Security benefits that are not subject to federal income tax under certain conditions.

AGI

Adjusted Gross Income; a measure of income calculated from your gross income and used to determine how much of your income is taxable.

Child and Dependent Care Credit

A tax credit in the U.S. for qualified expenses paid for the care of children under 13 or disabled dependents, enabling the taxpayer to work or look for work.

Qualified Day Care

A childcare facility meeting specific regulatory standards and qualifications, which expenses for may be deductible or eligible for specific tax credits.