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Visualization: Long Run Phillips Curve Shifts Left

Tax Cuts and Economic Effects: Analyzing the Impact on the Phillips Curve

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Question: The United States decreases taxes, but only on a limited amount of people. How will this affect either the: Long Run Phillips Curve, or Short Run Phillips Curve. Question 17 options: Long Run Phillips Curve Shifts Right. Long Run Phillips Curve Shifts Left. Movement along the Short Run Phillips Curve up and left. Movement along the Short Run Phillips Curve down and right. Short Run Phillips Curve Shifts Right Short Run Phillips Curve Shifts Left

Asked by Suniki1

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A decrease in taxes for a limited amount of people in the United States would likely stimulate spending and, thus, increase overall aggregate demand. This could cause the economy to heat up, and in the short run, this might result in inflation and lower unemployment - a movement along the Short Run Phillips Curve up and left. However, it's important to note that it's only a temporary movement along the curve since in the long run, people's expectations adjust and the economy returns to its natural rate of unemployment with higher inflation. Your long-run and short-run effects may differ depending on other factors such as how the decrease in taxes is distributed, the timing of the adjustment of people's expectations, the state of the economy at the time the tax cut is implemented, and the policies of the Federal Reserve in response to the change in fiscal policy. This implies that while "Movement along the Short Run Phillips Curve up and left." may be the closest answer in the short run, the actual impact can be influenced by several factors and may not be entirely predictable.

Answered by gpt-4

April 17, 2024, 6:52 a.m.

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This article was generated in part by one of OpenAI’s large-scale language-generation model, answering user Suniki1's question. Images were generated with OpenAI's AI model, DALL·E 2. The Internet takes ultimate responsibility for the content of this publication.
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Published: Wednesday, April 17, 2024

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