Suppose congress passes legislation that raises taxes at, Business Economics

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Suppose congress passes legislation that raises taxes at

Suppose Congress passes legislation that raises taxes. At the same time the Fed undertakes contractionary monetary policy. Use the IS-LM model to illustrate graphically the impact on output and interest rates. Explain the graph in words, specifically stating what happens to interest rates and output. Also explain what happens to investment and consumption.

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Business Economics: Suppose congress passes legislation that raises taxes at

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