Answered: If an economy is at full employment, an…

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter20: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 6CQQ

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Question

If an economy is at full employment, an income tax cut will result in:

a. an increase in LRAS and economic growth.

b. a higher price level and more output in the short run, but only a higher price leve in the long run.

c. a higher price level and more output in the short run, but only higher output in the long run.

d. an increase in AD and increase output in the long run.

e. a decrease in AD and an increase in capacity.

Explain

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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