Using the graph, shift the aggregate demand curve to depict the impact that a tax hike has on the economy. PRICE LEVEL 130 20 120 110 100 90 80 Aggregate Demand 70 + + 0 10 20 30 OUTPUT 40 50 60 Aggregate Demand ? Suppose the governments of two very similar economies, economy Y and economy Z, implement a permanent tax cut of equal size. The marginal propensity to consume (MPC) in economy Y is 0.85 and the MPC in economy Z is 0.8. The economies are otherwise completely identical. The tax cut will have a larger impact on aggregate demand in the economy with the

Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax Wedge equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the green points (triangle symbol) to plot total tax revenue at each of those tax levels. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. TAX REVENUE (Dollars) 1250 1125 1000 875 750 625 500 375 250 125 0 0 10 20 30 40 50 60 70 80 90 100 TAX (Dollars per bottle) Laffer Curve Suppose the government is currently imposing an $80-per-bottle tax on vodka. True or False: The government can raise its tax revenue by decreasing the per-unit tax on vodka. ○ True ○ False Consider the deadweight loss generated in each of the following cases: no tax, a tax of $40 per bottle, and a tax of $80 per bottle. On the…

Suppose the equation for the demand curve for some product X is P = 8 − 0.6Q and the supply curve is P = 2 + 0.4Q. What are the equilibrium price and quantity? Now suppose an excise tax is imposed on X such that the new supply equation is P = 4 + 0.4Q. How much tax revenue will this excise tax yield the government? Graph the curves, and label the area of the graph that represents the tax collection “TC” and the area that represents the efficiency loss of the tax “EL.” Briefly explain why area EL is the efficiency loss of the tax but TC is not.

Fiscal policy: Fiscal policy refers to the use of government spending and taxation to influence the economy. In the case of a severe negative supply shock, the government may increase spending to stimulate demand and offset the reduction in supply. For example, the government may invest in infrastructure projects to create jobs and boost economic growth. However, this may lead to an increase in government borrowing and higher interest rates, which can offset the benefits of the fiscal stimulus. show this graphically please.