11- Suppose the economy begins with output equal to its natural level (Yn). Then, there is an increase in income taxes. a. Using the AS-AD model developed in CH7, graphically show and explain the effects of an increase in income taxes on the positions of the AD, AS, IS, and LM curves in the short run and in the medium run. b. What happens to output, the interest rate, and the price level in the medium run? c. Explain the dynamics of adjustment from the initial situation to the final equilibrium (while explaining use the graphs vou drew for part (a)), Activ

11- Suppose the economy begins with output equal to its natural level (Yn). Then, there is an increase in income taxes. a. Using the AS-AD model developed in CH7, graphically show and explain the effects of an increase in income taxes on the positions of the AD, AS, IS, and LM curves in the short run and in the medium run. b. What happens to output, the interest rate, and the price level in the medium run? c. Explain the dynamics of adjustment from the initial situation to the final equilibrium (while explaining use the graphs vou drew for part (a)), Activ

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 8PA

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