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Starting from Long-Run Equilibrium, a Large Tax Increase Will Result

question 56

Multiple Choice

Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.


Definitions:

Interest Rate

The percentage of a sum of money charged for its use, often expressed as an annual percentage on loans or earned on savings.

Net Present Value

A financial metric that calculates the present value of all future cash flows associated with a project, minus the initial investment cost.

Interest Rate

The percentage charged on a loan or paid on savings, representing the cost of borrowing or the reward for saving.

Present Value

The present value of an anticipated amount of money or series of payments, considering a certain rate of return.

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