1)Consider an economy currently at its fullemployment output level An increase in income tax rates will cause

Question

1)Consider an economy currently at its full-employment output level. An increase in income tax rates will cause

output to fall in the short run, but not in the long run. What does this mean?

2)A decrease in the official cash rate (the interest rate set by the central bank) will cause aggregate output to increase. What does this mean?.

3)Suppose that the government is concerned at the current level of household income among st the poorest 20% of households in the population. State and explain three (separate) macroeconomic policy options that the government could use to address this issue.

Macroeconomics