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Suppose the U.S. Congress decides to levy an income tax on both wage income and capital income. Instead of receiving wL + rK = Y,
Suppose the U.S. Congress decides to levy an income tax on both wage income and capital income. Instead of receiving wL + rK = Y, consumers receive (1 - )wL + (1 - )rK = (1 - )Y. Trace the consequences of this tax for output per worker in the short and long runs, starting from steady state
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