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Illustration of a graph with the Short Run Phillips Curve shifting left

Tax Cuts in the United States: 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

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Decreasing taxes on a limited amount of people is more likely to influence spending behavior and overall gross domestic product in the short run. In effect, it can contribute to temporarily higher inflation and lower unemployment as individuals spend more. However, it's important to note that Phillips Curve is a theory that stipulates a supposed inverse relationship between rates of unemployment and corresponding rates of rises in wages that result within an economy. Hence, this specific situation would be best described as "Movement along the Short Run Phillips Curve down and right." The Short Run Phillips Curve may shift right or left due to changes in expectations about future inflation or changes in structural characteristics in the economy, which is not specifically mentioned in this scenario.

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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