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Instructions The ADAS model can be used to analyze the effects of fiscal policy, including changes in government spending or taxes. Suppose Congress votes to
Instructions The ADAS model can be used to analyze the effects of fiscal policy, including changes in government spending or taxes. Suppose Congress votes to decrease corporate income tax rates. Use the AD/AS model to analyze the likely impact of the tax cuts on the macroeconomy. Show graphically and explain your reasoning. What exactly causes AD and/or A3 to shift? What happens to GDP and the aggregate price level? Why? Rubc Criteria Weight Explain the Keynesian perspective on tax cuts and show graphically. Explain the Neoclassical Perspective on tax cuts and show graphically. 4 Explain the effect of tax cuts on GDP. Show graphically. 4 Explain the effect of tax cuts on the price level. Show graphically. 4 Write up your analysis using correct language, explaining all your work. 4 Total: 20
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