Consider the IS-LM AD-AS model of a closed economy with upward-sloping SRAS (due to sticky nominal wages) in the short run.

Assume originally the economy is operating at its LR natural rate of output . (Show the LRAS curve in the AD-AS analysis below as well.)

Consider an increase in taxes T. Show the short run effects of such an increase in T on the real output and real interest rate and general price level in the IS-LM and AD-AS diagrams and explain how you obtain your answers. (In the IS-LM diagram, show not only the effect of the exogenous change in T but also the endogenous impact of changing P.)