Business, 27.04.2021 16:00 westlakebuddy7884

Suppose that a hypothetical economy is operating at its long run equilibrium, but there is a budget surplus. The following figure shows the aggregate demand (AD) curve and short run aggregate supply (SRAS) curve for the economy. Although it is not shown here, the long run aggregate supply curve would be represented by a vertical line at $6 trillion, since the economy is producing at the potential output level: Now, suppose that fiscal authorities have decided to shrink the budget surplus by decreasing marginal tax rates. Assume that this change in marginal tax rates is perceived as a long-term change. According to supply-side economists, this fiscal policy change will cause the SRAS curve to shift to the right, but will have no impact on the long run aggregate supply. Is this statement true or false

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Suppose that a hypothetical economy is operating at its long run equilibrium, but there is a budget...

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