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[Answer the following questions using AE/PC model. Be precise and to the point.] Suppose the economy starts with output at potential. Then the Minister of

[Answer the following questions using AE/PC model. Be precise and to the point.]

Suppose the economy starts with output at potential. Then the Minister of Finance raises taxes. But the central bank does not change its monetary policy. Show with graphs what happens to the AE and PC curves and to output and inflation.

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