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Based on Your Understanding of the Aggregate Supply and Aggregate

question 52

Essay

Based on your understanding of the aggregate supply and aggregate demand model and the IS-LM model,graphically illustrate and explain what effect a tax cut will have on the economy.In your graphs,clearly illustrate the short-run and medium-run equilibria.


Definitions:

Collateral

An asset that a borrower offers to a lender as security for a loan, which can be seized if the loan is not repaid.

Allowance Method

An accounting technique used to estimate and account for bad debts or uncollectible accounts receivable.

Bad Debts

Accounts receivable that a company considers uncollectible and writes off as a loss in its financial statements.

Sales

The transactions involving the exchange of goods or services for money.

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