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# Using an income-expenditure diagram, use the infinite line and double-drop line tools to show the economy...

Using an income-expenditure diagram, use the infinite line and double-drop line tools to show the economy in equilibrium and mark that point E1. Use the copy tool to illustrate the impact of a decrease in lump-sum taxes of \$150 billion on planned aggregate spending. Assume that the marginal propensity to consume is 0.5. Label the new aggregate expenditure curve AE2. Then, use the double-drop line tool to plot and label the new equilibrium (E2).

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