Suppose that a permanent increase in taxes reduced the savings rate. (a) (6 points) According to...

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Suppose that a permanent increase in taxes reduced the savings rate. (a) (6 points) According to the Solow model, how would this affect aggregate output (as- suming a constant population)? (b) (6 points) Given your answer to part (a), in which direction would the long-run aggregate supply curve shift? Suppose that a permanent increase in taxes reduced the savings rate. (a) (6 points) According to the Solow model, how would this affect aggregate output (as- suming a constant population)? (b) (6 points) Given your answer to part (a), in which direction would the long-run aggregate supply curve shift?

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Lets address each part separately a In the Solow growth model aggregate output in the long run is de... View the full answer