120 PRICE LEVEL 110 100 90 80 TO D 10 20 30 OUTPUT Aggregate Demand 40 50 00 Aggregate Demand Suppose the governments of two very similar economies, economy B and economy A, implement a permanent tax cut of equal size. Investment spending in economy B is less sensitive to changes in the interest rate than investment spending in economy A. The economies are otherwise completely identical. The tax cut will have a smaller impact on aggregate demand in the economy with the
120 PRICE LEVEL 110 100 90 80 TO D 10 20 30 OUTPUT Aggregate Demand 40 50 00 Aggregate Demand Suppose the governments of two very similar economies, economy B and economy A, implement a permanent tax cut of equal size. Investment spending in economy B is less sensitive to changes in the interest rate than investment spending in economy A. The economies are otherwise completely identical. The tax cut will have a smaller impact on aggregate demand in the economy with the
Chapter12: Sequences, Series And Binomial Theorem
Section12.3: Geometric Sequences And Series
Problem 12.58TI: What is the total effect on the economy of a government tax rebate of $500 to each household in...
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Transcribed Image Text:120
PRICE LEVEL
110
100
90
80
TO
D
10
20
30
OUTPUT
Aggregate Demand
40
50
00
Aggregate Demand
Suppose the governments of two very similar economies, economy B and economy A, implement a permanent tax cut of equal size. Investment
spending in economy B is less sensitive to changes in the interest rate than investment spending in economy A. The economies are otherwise
completely identical,
The tax cut will have a smaller impact on aggregate demand in the economy with the
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