Suppose that the United States is at full employment. Then the federal government cuts taxes, and all other influences on aggregate demand remain the same. Explain the effect of the tax cut on aggregate demand in the short run
Suppose that the United States is at full employment. Then the federal government cuts taxes, and all other influences on aggregate demand remain the same. Explain the effect of the tax cut on aggregate demand in the short run
Chapter8: Macroeconomic Equilibrium: Aggregate Demand And Supply
Section: Chapter Questions
Problem 11E
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Suppose that the United States is at full employment. Explain the effect of each of the following events on
- Union wage settlements push the money wage rate up by 10 percent.
- The price level increases.
- Potential GDP increases
Suppose that the United States is at full employment. Then the federal government cuts taxes, and all other influences on aggregate demand remain the same. Explain the effect of the tax cut on aggregate demand in the short run.
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