Question by clueless: will decreasing the interest rates or lowering tax rates increase consumer spending more?
and does the IS-LM graph have anything to do with this? if not, is there a graph i can use to answer this question? The tax cuts are mainly on personal income tax.

Best answer:

Answer by canadian-italian
all i know is yes. if interest rates r lower, consumers can take out a loan for something knowing if they have a resonable chance of paying it back. also related to this is the fact that if they had taken a loan before when the rate was higher they would have paod more, but now they would have more money since it is lower.

also lowering tax rates would probably not have a direct effect until the actual taxes are done and they realize that now they have a bit more monery then before so people tend to buy something with that extra money.

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