Question

. Along any given IS curve: A) tax rates are fixed, but government spending varies. B) government spending is fixed, but taxes vary. C) both government spending and taxes vary. D) both government spending and taxes are fixed.

Answer 1

D) Both government spending and taxes are fixed.

Step-by-step explanation:

IS curve: IS curve stands for investment and savings. It has a download slope, when liquidity in the market increase, therefore, stimulus injected in the market to increase investment and increase in investment cause multiplier effect on consumption, which leads to an increase in national income and product rises. IS curve shows the combination of consumer demand and investment demand, therefore, both government spending and taxes are fixed.