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Suppose the Keynesian model had income taxes instead of the fixed taxes that we used in class (so now, Tx = tY where 't' is
Suppose the Keynesian model had income taxes instead of the fixed taxes that we used in class (so now, Tx = tY where 't' is the income tax rate).What would happen to the Keynesian multipliers that we derived in class (bigger or smaller)? Intuitively, why?Would business cycles be more or less pronounced (bigger or smaller booms and busts)?Would fiscal policy (government spending) be more or less powerful?
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