Business cycle
What is meant by the term business cycle as described by economists?
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It refers to alternating increases and decreases in the level of business activity which is measured by the level of real GDP. The changes in activity levels are manifested in other variables like consumption spending, interest rates, consumer confidence levels, business confidence, unemployment levels, inflation rate, among many other indicators.
A change in tax rate changes the IS equation, LM equation remaining the same. Let same, let us suppose that the government raises the tax rate from 20 percent to 25 percent<
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