PRICE LEVEL 120 110 100 90 80 Aggregate Demand 0 10 20 40 50 60 30 OUTPUT Suppose the governments of two different economies, economy J and economy K, implement a tax cut of the same size. The tax cut in economy J is permanent, while the tax cut in economy K is temporary. The economies are identical in all other respects. The tax cut will have a larger impact on aggregate demand in the economy with the g Aggregate Demand 70

PRICE LEVEL 120 110 100 90 80 Aggregate Demand 0 10 20 40 50 60 30 OUTPUT Suppose the governments of two different economies, economy J and economy K, implement a tax cut of the same size. The tax cut in economy J is permanent, while the tax cut in economy K is temporary. The economies are identical in all other respects. The tax cut will have a larger impact on aggregate demand in the economy with the g Aggregate Demand 70

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 5CQQ

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