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Suppose that the government implemented a transfer program in whichit subsidized household consumption, and nanced this subsidy by im-posing a (lump sum) tax on firm
Suppose that the government implemented a transfer program in whichit subsidized household consumption, and nanced this subsidy by im-posing a (lump sum) tax on firm profits.Evaluate the following claim in the context of the static general equi-librium model with production: \The creation of this transfer programwill increase the well-being of households because it will make con-sumption goods cheaper for households."
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