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An economy is initially in equilibrium at the natural level, and sticky price model describes the economy. Suppose Congress decides to cut taxes. Use an
An economy is initially in equilibrium at the natural level, and sticky price model describes the economy. Suppose Congress decides to cut taxes. Use an appropriate model to answer the following questions below; Keynesian-cross model, Liquidity preference money market model, IS-LM model, and AD-AS model. It is assumed that everything else stays constant and stick price theory explains in short run. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curve shifts; and v. the terminal equilibrium values. (You can use a graph tool in MS Word or take a picture of your graph and embed it here.) a. Illustrate graphically the impact of tax cuts on the equilibrium level of Planned Expenditure. b. Illustrate graphically the impact of tax cuts on the equilibrium level of Income and Interest Rate in short run. c. Illustrate graphically the impact of tax cuts on the equilibrium level of Aggregate Price and Income in short run. d. Illustrate graphically the impact of tax cuts on the equilibrium level of Income and Interest Rate in long run. And explain. e. Illustrate graphically the impact of tax cuts on the equilibrium level of Aggregate Price
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