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Unformatted text preview: Scenario: Households and businesses are now much less optimistic about the future state of the economy. 2. The economy (macro equilibrium) is at potential or full employment output. Scenario: There is a substantial increase in production costs. 3. The economy is far below potential or full employment output. Scenario: Government increases its spending and reduces personal income tax rates. 4. The economy is at potential or full employment output. Scenario: Government increases spending and reduces personal income taxes. 5. The economy experiences a significant increase in production technology....
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- Fall '07