- 11 Assume That The Analysis Of Taxes Is Changed So That Taxes T Are Made A Function Of Income As In T T T Y Wh 1 (19.01 KiB) Viewed 32 times
11. Assume that the analysis of taxes is changed so that taxes, T, are made a function of income, as in T = T. + t'Y, wh
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11. Assume that the analysis of taxes is changed so that taxes, T, are made a function of income, as in T = T. + t'Y, wh
11. Assume that the analysis of taxes is changed so that taxes, T, are made a function of income, as in T = T. + t'Y, where T. and t are parameters of the tax code and t is positive but less than 1. You may assume that the interest rate is fixed. a. How does the multiplier for government purchases in this case compare with a case where t is zero? b. How does the slope of the IS curve in this case compare with a case where t is zero? c. What happens to the budget deficit if the government increases its purchases?