Suppose the governments of two different economies

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Suppose the governments of two different economies, economy A and economy B, implement a permanent tax cut of the same size. Investment spending in economy A is less sensitive to changes in the interest rate than investment spending in economy B. The economies are identical in all other respects. The tax cut will have a smaller impact on aggregate demand in the economy with the a) higher sensitivity to changes in the interest rate, or b) lower sensitivity to changes in the interest rate

Reference no: EM13695099

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