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Suppose a nationwide small-government movement leads state and local governments to significantly reduce their capital spending on roads and other infrastructure. Using the lenders' -
Suppose a nationwide small-government movement leads state and local governments to
significantly reduce their capital spending on roads and other infrastructure. Using the lenders' -
borrowers' curve apparatus discussed in class or other appropriate tools, analyze the effect this
change in behavior would have on:
1) the yield of tax exempt bonds (r E),
2) the quantity of tax exempt bonds issued (Q E), and
3) the implied marginal tax bracket T M
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