6. Changes in taxes The following graph plots an aggregate demand curve. Using the graph, shift the aggregate demand curve to depict the impact that a tax cut has on the economy. PRICE LEVEL 130 120 110 100 90 60 2 70 O 10 20 30 OUTPUT Aggregate Demand 40 50 60 Aggregate Demand Suppose the governments of two very similar economies, economy N and economy M, implement a tax cut of equal size. The tax cut in economy N is permanent, while the tax cut in economy M is temporary. The economies are otherwise completely identical. The tax cut will have a larger impact on aggregate demand in the economy with the

6. Changes in taxes The following graph plots an aggregate demand curve. Using the graph, shift the aggregate demand curve to depict the impact that a tax cut has on the economy. PRICE LEVEL 130 120 110 100 90 60 2 70 O 10 20 30 OUTPUT Aggregate Demand 40 50 60 Aggregate Demand Suppose the governments of two very similar economies, economy N and economy M, implement a tax cut of equal size. The tax cut in economy N is permanent, while the tax cut in economy M is temporary. The economies are otherwise completely identical. The tax cut will have a larger impact on aggregate demand in the economy with the

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Costs Of Taxation

Section: Chapter Questions

Problem 3CQQ

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