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Consider the Aggregate Demand-Aggregate Supply framework assume expected inflation is always zero. Starting at Yn suppose a tax cut is implement which increases disposable income and

Consider the Aggregate Demand-Aggregate Supply framework; assume expected inflation is always zero. Starting at Yn, suppose a tax cut is implement which (i) increases disposable income, and (ii) increases the incentive to work so that labor supply increases. Show the immediate effect in an AD-AS graph.

Apr 04 2020 View more View Less

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