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Suppose an economy is in long run macronomic equililbrium, where there is a sudden, large fall in consumption spending. (a)Depict the effect of this change
Suppose an economy is in long run macronomic equililbrium, where there is a sudden, large fall in consumption spending.
- (a)Depict the effect of this change in conusmption in the keynesian cross, and in the short run of the AD-AS model. Show the change in income, and in the price level. 5 points.
- (b)What effect will this change in income have on the amount of federal income taxes collected? Show the effect of the change in taxes collected in the keynsian cross and the short run of the AD-AS model. What is the name for this type of tax change?
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