Using the Aggregate Demand-Aggregate Supply Diagram,graphically Illustrate and Explain the Impact

question 29

Essay

Using the aggregate demand-aggregate supply diagram,graphically illustrate and explain the impact of an escalating budget deficit on the price level and real income in the long-run.

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Definitions:

Tax

Mandatory financial charges imposed by a government on individuals, corporations, or other entities to fund public expenditure.

Commerce

The activity of buying and selling, especially on a large scale, involving transportation and exchange of goods and services.

Commodities

Basic goods used in commerce that are interchangeable with other goods of the same type.

Confederation

An organization that consists of a number of parties or groups united in an alliance or league, often referring to a union of states with limited central power.