2. a. Suppose policymakers passes legislation that significantly reduces taxes. Use the Keynesian-cross model to illustrate graphically the impact of a reduction in taxes on the equilibrium level of income. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curve shifts; and v. the terminal equilibrium values. 'sl b. Explain in words what happens to equilibrium income as a res" of the tax cut and the time horizon appropriate for this analysis.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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2.
a. Suppose policymakers passes legislation that significantly reduces taxes.
Use the Keynesian-cross model to illustrate graphically the impact of a
reduction in taxes on the equilibrium level of income. Be sure to label: i.
the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction
the curve shifts; and v. the terminal equilibrium values.
'sl
b. Explain in words what happens to equilibrium income as a res" of the tax
cut and the time horizon appropriate for this analysis.
Transcribed Image Text:2. a. Suppose policymakers passes legislation that significantly reduces taxes. Use the Keynesian-cross model to illustrate graphically the impact of a reduction in taxes on the equilibrium level of income. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curve shifts; and v. the terminal equilibrium values. 'sl b. Explain in words what happens to equilibrium income as a res" of the tax cut and the time horizon appropriate for this analysis.
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