QUESTION 2 Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that prices are fixed in the short run and are fully flexible in the long run. The initial full-employment level of output is y-900 and the initial price level is p=100: The aggregate demand curve is given by y=1500 – 6P: Scenario 1, long run: A reduction in personal income taxes shifts the demand curve to y=1530 – 6P. In the long run, the output is and the price level is
QUESTION 2 Consider the aggregate supply-aggregate demand (AD-AS) model that we saw in class. Assume that prices are fixed in the short run and are fully flexible in the long run. The initial full-employment level of output is y-900 and the initial price level is p=100: The aggregate demand curve is given by y=1500 – 6P: Scenario 1, long run: A reduction in personal income taxes shifts the demand curve to y=1530 – 6P. In the long run, the output is and the price level is
Chapter5: Introduction To Macroeconomics
Section: Chapter Questions
Problem 3.4P
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