The economy has been sluggish, so in an effort to increase output in the short run, government

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The economy has been sluggish, so in an effort to increase output in the short run, government offi cials have decided to cut taxes. They are considering two possible tax cuts of equal size. The fi rst would reduce the taxes everyone pays by 10 percent for one year. The second would eliminate taxes on people in the lowest income bracket for one year, leaving everyone else’s taxes the same. Does it matter which one of these plans the government implements in terms of achieving its goal? Why or why not?

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Money Banking And Financial Markets

ISBN: 9780073375908

3rd Edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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