A tax cut now shifts both the IS* and the LM* curves. Figure 12–22 shows the case of floating exchange rates. The IS* curve shifts to the right, from IS to IS . The LM* curve shifts to the left, however, from LM to LM .
A tax cut now shifts both the IS* and the LM* curves. Figure 12–22 shows thecase of floating exchange rates. The IS* curve shifts to the right, from IS to IS . TheLM* curve shifts to the left, however, from LM to LM .