Solved: How does each of the following factors affect the is curve, Managerial Economics

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How does each of the following factors affect the is curve

1. How does each of the following factors affect the IS curve? Start your argument from the diagram of Id-Sd and show how the associated change will affect IS curve.

a. An increase in government purchases (when it does not affect the productivity).

b. An increase in taxes (when Ricardian equivalence does not hold).

c. An increase in national income.

d. An increase in marginal productivity of capital.

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Managerial Economics: How does each of the following factors affect the is curve

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