Answer it correctly please. I Consider a hypothetical country in which,initially, real GDP equals potential GDP.Suppose that the government increasestaxes. All else equal (with regard to the AD-IA model), relative to the short-run level, inthe medium run, inflation is:A. higher.B. lower.C. the same.

In an economy, the potential GDP refers to the maximum level of output that can be generated…

Answered: Consider a hypothetical country in…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter6: How Statisticians Measure Inflation

Section: Chapter Questions

Problem 3TY

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Consider a hypothetical country in which, initially, real GDP equals potential GDP. Suppose that the government increases taxes. All else equal (with regard to the AD- IA model), relative to the short-run level, in the medium run, inflation is: A. higher. B. lower. C. the same.