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Define potential output. Is it possible for an economy to produce an amount greater than its potential output?Explain your answer. Explain how the tax transfer

  1. Define potential output. Is it possible for an economy to produce an amount greater than its potential output?Explain your answer.
  2. Explain how the tax transfer system affects the distribution of income across households. Suggest two policies that might achieve greater equity in the distribution of income. What effects might these policies have on the economy?

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