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Question: Suppose that the government cuts taxes in response to a recessionary gap, but because of legislative delays the tax cut is not put in place for 18 months. Assuming that the government's objective is to stabilize output and inflation, use an AD-AS diagram to illustrate how this policy action might actually prove to be counterproductive.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M93136400

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