Go to www.eurmacro.unisg.ch/Tutor/islm.html. Set the policy instruments to be G = 80, t = 0.20, c = 0.75, b = 40. Now increase government spending, G, from 80 to 160. How much does the IS curve shift horizontally to the right? Why is this amount greater than the increase in G? Now increase the marginal propensity to consume, c, from 0.75 to 0.90. Which direction does the IS curve shift and why? How much does it shift? Now increase the tax rate, t, from 0.20 to 0.28. Which direction does the IS curve shift and why? How much does it shift?
