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Question
Refer to the above figure. Suppose the economy is at point A. By the proper use of fiscal policy, the government can
A) boost taxes to shift LRAS through point A.
B) increase government spending to get the economy to point B.
C) raise income tax rates to get the economy to point C.
D) reduce government spending to get the economy to point D.
Answer
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Why should a perfect competitor produce at which price equals marginal cost?
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Why?
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