00:01
Working within the canadian framework, we're looking at four different examples that are going to be a solution to either inflation or a recession.
00:07
We'd like to identify which is which.
00:09
So part a, if there's an increase in the tax on consumer income, this is likely to be more of a solution for inflation.
00:18
And the reason for this is because by increasing these taxes, the government will be able to reduce consumer spending.
00:25
So what's going to happen here is that the aggregate demand curve is going to shift to the left as consumer spending.
00:30
Is reduced and the result of this is going to be both lower output as well as a lower price level.
00:41
Part b, if there's an increase in military spending, this is likely to be more of a solution for a recession.
00:51
And the reason here is that by increasing this military spending, the government will be able to boost aggregate spending within the economy and by doing that it's going to shift the aggregate demand curve to the right and it'll end up increasing output.
01:04
It'll bring that output closer to whatever that optimal level is...