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Suppose that the Federal Government announced a tax rebate of $500 for allindividuals filing singly and $1000 for all families filing jointly or as head of householdin the upcoming tax year. Further, suppose that the Government budget included a broadbased reduction in Government spending on goods and services, whose total amount was equal to the total amount of the tax rebates. What would be the overall impact on AD of these policy changes or would the policy change effects completely cancel each other out?
