The following graph plots an aggregate demand curve. Using the graph, shift the aggregate demand curve to depict the impact that a tax hike has on the economy. Suppose the governments of two very similar economies, economy Y and economy Z, implement a tax cut of equal size. The tax cut in economy Y is temporary, while the tax cut in economy Z is permanent. The economies are otherwise completely identical. The tax cut will have a smaller impact on aggregate demand in the economy with the (temporary tax cut/permanent tax cut) .
The following graph plots an aggregate demand curve. Using the graph, shift the aggregate demand curve to depict the impact that a tax hike has on the economy. Suppose the governments of two very similar economies, economy Y and economy Z, implement a tax cut of equal size. The tax cut in economy Y is temporary, while the tax cut in economy Z is permanent. The economies are otherwise completely identical. The tax cut will have a smaller impact on aggregate demand in the economy with the (temporary tax cut/permanent tax cut) .
Chapter20: Aggregate Demand And Supply
Section: Chapter Questions
Problem 7SQ
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The following graph plots an aggregate demand curve.
Using the graph, shift the aggregate demand curve to depict the impact that a tax hike has on the economy.
Suppose the governments of two very similar economies, economy Y and economy Z, implement a tax cut of equal size. The tax cut in economy Y is temporary, while the tax cut in economy Z is permanent. The economies are otherwise completely identical.
The tax cut will have a smaller impact on aggregate demand in the economy with the (temporary tax cut/permanent tax cut) .
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