Rsti Technologies AG is a Zurich-based company with affiliates around the world. Suppose you were working as

Question:

Rösti Technologies AG is a Zurich-based company with affiliates around the world. Suppose you were working as Rösti's finance manager in Khartoum, Sudan. A recent business report explained that the Sudanese government was planning on raising personal income taxes to help reduce inflation and correct the nation's large government budget deficit. Using the Three-Sector Model, explain how an increase in personal income taxes would affect Sudan's economy. Assume the Sudanese pound (SDD) was fixed against the dollar at SDD4.4 per U.S. dollar, and Sudan faced relatively low-mobility international capital markets.