Differ from the case without a labor-supply effect

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Assume that higher taxes discourage people from working. Further assume that the SRAS is upward sloping because of the Imperfect-Information theory. a) Imagine there is a tax cut. What would be the impact on the AD, SRAS and LRAS curves? b) What is the short-run impact on output and the price level? How does your answer differ from the case without a labor-supply effect?

Reference no: EM13984433

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