Question
Hey I'm having a hard time figuring this question out. Thanks for helping. Consider the following model with exogenous public investment and spending. Y =
Hey I'm having a hard time figuring this question out. Thanks for helping.
Consider the following model with exogenous public investment and spending.
Y = C + I + G and C = a + bYd. Disposable income Yd is equal to Y T, where T represents total taxes. Suppose that taxes are not directly linked to income so that T can be increased or decreased independently of income.
Determine Y / T (by Determining the expression of the change in Y (noted Y), associated with an increase in taxes T (noted T). Present the results algebraically.), that is, the tax multiplier.
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