For this question, assume that all factors that effect economic growth remain constant. Suppose that the economy is init
Posted: Thu May 19, 2022 9:17 am
For this question, assume that all factors that effect economic
growth remain constant. Suppose that the economy is initially
operating at the full employment level. Consider that there is a
deficit in government budget (G > T). To reduce the deficit, the
government plans to increase the taxes. What will be the effect of
an increase in taxes in the short-run and in the long-run? Explain
the dynamics of employment, output, and prices in the short-run and
in the long-run by using the AS-AD model. Illustrate your answers
by drawing the relevant graphs.
growth remain constant. Suppose that the economy is initially
operating at the full employment level. Consider that there is a
deficit in government budget (G > T). To reduce the deficit, the
government plans to increase the taxes. What will be the effect of
an increase in taxes in the short-run and in the long-run? Explain
the dynamics of employment, output, and prices in the short-run and
in the long-run by using the AS-AD model. Illustrate your answers
by drawing the relevant graphs.