According to the IS-LM Model, When the Government Increases Taxes

question 84

Multiple Choice

According to the IS-LM model, when the government increases taxes and government purchases by equal amounts:

• A) income, the interest rate, consumption, and investment are unchanged.
• B) income and the interest rate rise, whereas consumption and investment fall.
• C) income and the interest rate fall, whereas consumption and interest rise.
• D) income, the interest rate, consumption, and investment all rise.