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 1201 20 19 110 100 90 80 Aggregate Demand 70 0 10 20 30 40 50 OUTPUT Sunnnee the Aggregate Demand Suppose the governments of two very similar economies, economy Y and economy Z, implement a permanent tax cut of equal size. Investment spending in economy Y is more sensitive to changes in the interest rate than investment spending in economy Z. The economies are otherwise completely identical. The tax cut will have a larger impact on aggregate demand in the economy with the,

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Chapter11: Fiscal Policy And The Federal Budget
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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
1201
20
19
110
100
90
80
Aggregate Demand
70
0
10
20
30
40
50
OUTPUT
Sunnnee the
Aggregate Demand
Transcribed Image Text: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 1201 20 19 110 100 90 80 Aggregate Demand 70 0 10 20 30 40 50 OUTPUT Sunnnee the Aggregate Demand
Suppose the governments of two very similar economies, economy Y and economy Z, implement a permanent tax cut of equal size. Investment
spending in economy Y is more sensitive to changes in the interest rate than investment spending in economy Z. The economies are otherwise
completely identical.
The tax cut will have a larger impact on aggregate demand in the economy with the,
Transcribed Image Text:Suppose the governments of two very similar economies, economy Y and economy Z, implement a permanent tax cut of equal size. Investment spending in economy Y is more sensitive to changes in the interest rate than investment spending in economy Z. The economies are otherwise completely identical. The tax cut will have a larger impact on aggregate demand in the economy with the,
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