Stabilization policy may be necessary to slow down the speed of the adjustment process

Which of the following tax structures helps in reducing income inequality?

a. Proportional tax structure b. Regressive tax structure c. Indirect tax structure d. Progressive tax structure e. A combination of proportional and regressive tax structure.

Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.

A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower