2. Government purchases of goods and services directly affect aggregate demand, and changes in taxes and government

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2. Government purchases of goods and services directly affect aggregate demand, and changes in taxes and government transfers affect aggregate demand indirectly by changing households’ disposable income. Expansionary fiscal policy shifts the aggregate demand curve rightward; contractionary fiscal policy shifts the aggregate demand curve leftward.

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Essentials Of Economics

ISBN: 9781429218290

2nd Edition

Authors: Paul Krugman, Robin Wells, Kathryn Graddy

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