(4) In the short run, a firm in the perfect competitive market should always leave the market as long as profits are negative. Do you agree the above statement? (7%)

4. The Trump administration has recently signed a tax overhaul bill into law. The tax law is estimated to reduce the government's revenue by 1.5 trillion over the next decade, which would be the largest tax cut for Americans since 1986. (1) Use the IS-LM framework to explain the impact of the tax cut on the interest rate and income in the short run. (5%)

(4) In the short run, a firm in the perfect competitive market should always leave the market as long as profits are negative. Do you agree the above statement? (7%)

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