The following graph plots an aggregate demand curve. Using the graph, shift the aggregate demand curve to depict the impact that a tax cut has on the economy. PRICE LEVEL 130 120 110 100 90 80 70 0 10 20 30 OUTPUT Aggregate Demand 40 50 60 Aggregate Demand (?) Suppose the governments of two very similar economies, economy B and economy A, implement a permanent tax cut of equal size. Investment spending in economy B is less sensitive to changes in the interest rate than investment spending in economy A. The economies are otherwise completely identical.
The following graph plots an aggregate demand curve. Using the graph, shift the aggregate demand curve to depict the impact that a tax cut has on the economy. PRICE LEVEL 130 120 110 100 90 80 70 0 10 20 30 OUTPUT Aggregate Demand 40 50 60 Aggregate Demand (?) Suppose the governments of two very similar economies, economy B and economy A, implement a permanent tax cut of equal size. Investment spending in economy B is less sensitive to changes in the interest rate than investment spending in economy A. The economies are otherwise completely identical.
Chapter18: Debates In Macroeconomics Over The Rolse And Effects Of Government
Section18.10: Demand-side And Supply-side Views Of The Economy And Government Tools For Changing Real Gdp
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