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QUESTION 8 In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts in these two curves
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A dis-equilibrium will be caused due to increase in demand and a fall in supply. Hence, to make the condition back to normal, the government will have to increase the taxes. Increasing the taxes will lead to a fall in demand and hence equilibrium will be restored.

A GDP decline, leads to less cash, hence a decline in tax revenue, which in turn leads to a restraint aggregate demand.

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