Refer to the above figure. Suppose that the economy starts at AD1. If
Refer to the above figure. Suppose that the economy starts at AD1. If the government reduces taxes, then the economy goes to AD2, but then falls back to AD3. This is an example of
A) complete crowding-out effect. B) partial crowding-out effect.
C) Ricardian equivalence. D) laissez-faire.
ANSWER
B
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