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 hike has on the economy. PRICE LEVEL 130 120 110 g 100 90 80 Aggregate Demand 70 0 10 20 30 OUTPUT 40 50 60 Aggregate Demand (?) 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
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 hike has on the economy. PRICE LEVEL 130 120 110 g 100 90 80 Aggregate Demand 70 0 10 20 30 OUTPUT 40 50 60 Aggregate Demand (?) 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
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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