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The question is as follows: Q.5. Suppose the Congress votes on a proposal which significantly reduces taxes for the economy. a. Which component of planned

The question is as follows:

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Q.5. Suppose the Congress votes on a proposal which significantly reduces taxes for the economy. a. Which component of planned expenditure will be affected? b . In the new short run equilibrium, what happens to equilibrium output and interest rate? Explain your answer using the IS-LM, money market and Keynesian Cross graphs. C. How does the economy adjust to the long-run equilibrium? Explain using the points on the graphs discussed above

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