This is a 3 part question. Thank you **Text Transcription for Educational Website:****Graph Analysis:**The graph illustrates the interaction between Aggregate Demand (AD) and Aggregate Supply (AS) in an economy, depicting the relationship between the price level and real GDP.- **Axes:** - The vertical axis represents the **Price Level**. - The horizontal axis represents **Real GDP**.- **Curves:** - The **AD Curve** (Aggregate Demand) is shown as a downward-sloping line, indicating that as the price level decreases, the quantity of real GDP demanded increases. - The **AS Curve** (Aggregate Supply) is an upward-sloping line, suggesting that as the price level increases, the quantity of real GDP supplied also increases.- **Sliders:** - Two sliders are provided to manipulate the positions of the AD and AS curves, allowing users to simulate changes in economic conditions. These sliders help visualize the impact of income tax cuts as perceived by supply-side economists. For example, shifting the AS curve to the right can illustrate an increase in aggregate supply due to a tax cut.**Causation Chains Table:**The table requires users to complete causation chains reflecting the Keynesian and supply-side effects of an income tax cut for two different scenarios (Case I and Case II). Dropdown menus allow users to select appropriate terms to fill in the gaps.**Case I: Supply-Side Economics**1. **Policy:** Income tax cut2. **Effect:** Increases the supply of labor3. **Result:** [Dropdown to select appropriate term related to aggregate supply]4. **Outcome:** Real GDP [Dropdown to select impact on real GDP and the price level]**Case II: Keynesian Economics**1. **Policy:** Income tax cut2. **Effect:** Increases consumption spending3. **Result:** [Dropdown to select appropriate term related to aggregate demand]4. **Outcome:** Real GDP [Dropdown to select impact on real GDP and the price level]This educational tool helps students understand the theoretical perspectives and economic impacts of fiscal policies like income tax cuts. **9. Keynesian demand-side versus supply-side effects**Consider an economy operating below its potential output level. The government wants to enact a reduction in income taxes in an effort to restore the economy to potential output.*On the following graph, shift one of the curves to illustrate the impact of the income tax cut on aggregate supply (AS) and aggregate demand (AD) that is emphasized by Keynesian economists.***Graph Explanation:**The graph is a typical economic model illustrating the relationship between Real GDP (on the horizontal axis) and Price Level (on the vertical axis). - The Aggregate Demand (AD) curve is downward sloping, demonstrating the inverse relationship between the price level and the quantity of goods and services demanded. - The Aggregate Supply (AS) curve is upward sloping, showing the direct relationship between the price level and the quantity of goods and services supplied.Keynesian economists often focus on the impact of fiscal policy, such as a reduction in income tax, on the AD curve. In this context, a tax reduction is anticipated to shift the AD curve to the right, indicating an increase in overall demand due to increased consumer spending. This shift aims to move the economy closer to its potential output.

When the government deliberately influence the economic outcome through the change in the tax or its spending or combination of both is known as fiscal policy. According to the Keynesian economist, the decrease in income tax affects the demand-side factors. The income tax cut increases the disposable income of consumers as the disposable income is the difference between the income earned and tax (Yd = Y – Tax). Due to this, consumers now have more money to spend, so they increase the consumption which will shift the AD curve towards right. The income tax cut increases the real GDP and increases the price. According to the supply-side economist, the decrease in income tax affects the supply-side factors. The income tax cut increases the after-tax income of workers which provide a stronger incentive to work to workers as cut in income increases the pay off derive from work tax. Due to this, the supply curve of worker increases or shifts right which decreases the wages and as wages reduces, the cost of production reduces and it shifts the AS curve towards right. The income tax cut increases the real GDP and decreases the price.

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Economics

On the following graph, shift one of the curves to illustrate the dominant impact of the income tax cut according to supply-side economists. AS AD AS AD REAL GDP Use the dropdown menus to fill in the table and complete the causation chains for the Keynesian effects and supply-side effects of the income ta: Case I Case II Policy Policy 1. Income tax cut 1. Income tax cut 2. Increases the supply of labor 2. Increases consumption spending aggregate 3. aggregate 4. Real GDP and the price level 4. Real GDP and the price level PRICE LEVEL 3.

On the following graph, shift one of the curves to illustrate the dominant impact of the income tax cut according to supply-side economists. AS AD AS AD REAL GDP Use the dropdown menus to fill in the table and complete the causation chains for the Keynesian effects and supply-side effects of the income ta: Case I Case II Policy Policy 1. Income tax cut 1. Income tax cut 2. Increases the supply of labor 2. Increases consumption spending aggregate 3. aggregate 4. Real GDP and the price level 4. Real GDP and the price level PRICE LEVEL 3.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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