Only Answered D. k1. In early 2017, the Trump administration instituted the Tax Cuts and Jobs Act (TCJA) whichlowered taxes on both individuals and businesses. We will discuss this policy below.Let's start with assuming the US was producing at the full-employment level of output, alsoknown as potential GDP (Y³).<a. Draw an aggregate expenditure function, which will represent the US economy. Label theinitial equilibrium as point A. <b. Taxes decrease as mentioned above. Assuming this was the only change in the economy(meaning GDP has not adjusted), explain below and show above how this affects yourdiagram in part a. Label this new point as point B.<ܢܢc. Holding all else constant, do we see an unplanned increase, unplanned decrease, or nochange to inventories?<←d. According to your answer in part c, what do you expect to happen to the economy in thefuture due to this decrease in taxes? Where will the economy move towards? Show thisending spot as point C.<

d. According to your answer in part c, what do you expect to happen to the economy in the future due to this decrease in taxes? Where will the economy move towards? Show this ending spot as point C.< (

d. According to your answer in part c, what do you expect to happen to the economy in the future due to this decrease in taxes? Where will the economy move towards? Show this ending spot as point C.< (

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Only Answered D.

k
1. In early 2017, the Trump administration instituted the Tax Cuts and Jobs Act (TCJA) which
lowered taxes on both individuals and businesses. We will discuss this policy below.
Let's start with assuming the US was producing at the full-employment level of output, also
known as potential GDP (Y³).<
a. Draw an aggregate expenditure function, which will represent the US economy. Label the
initial equilibrium as point A. <
b. Taxes decrease as mentioned above. Assuming this was the only change in the economy
(meaning GDP has not adjusted), explain below and show above how this affects your
diagram in part a. Label this new point as point B.<
ܢܢ
c. Holding all else constant, do we see an unplanned increase, unplanned decrease, or no
change to inventories?<
←
d. According to your answer in part c, what do you expect to happen to the economy in the
future due to this decrease in taxes? Where will the economy move towards? Show this
ending spot as point C.<

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