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. 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 (temporary tax cut/permanent tax cut) .
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. 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 (temporary tax cut/permanent tax cut) .
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter8: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
Problem 1WNG
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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.
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 (temporary tax cut/permanent tax cut) .
![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
100
90
80
70
0
10
20
30
OUTPUT
Aggregate Demand
40
50
60
Aggregate Demand
(?)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0cee426f-784d-4141-90f5-424c7b43f77b%2F7cb5f3b7-5545-4290-b1f9-990900000982%2F1nx9stn_processed.png&w=3840&q=75)
Transcribed Image Text: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
100
90
80
70
0
10
20
30
OUTPUT
Aggregate Demand
40
50
60
Aggregate Demand
(?)
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