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Suppose That Changes in Aggregate Demand Tended to Be Infrequent

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Essay

Suppose that changes in aggregate demand tended to be infrequent and that it took a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?


Definitions:

Incremental Cash Flow

The extra cash flow from operations that a company gets by starting a new project.

Tax Rate

This represents the percentage at which an individual or corporation is taxed by the government.

Straight-Line Depreciation

Straight-line depreciation is a method of allocating the cost of a tangible asset over its useful life in equal annual installments.

Tax Shield

A reduction in taxable income for individuals or corporations achieved through claiming allowable deductions.

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