Consider an economy in which government raises revenue with an income tax. In class we look at two options: a lump sum t

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Consider An Economy In Which Government Raises Revenue With An Income Tax In Class We Look At Two Options A Lump Sum T 1 (58.9 KiB) Viewed 25 times

Consider an economy in which government raises revenue with an income tax. In class we look at two options: a lump sum tax equal to a fixed amount (that we called TA) or imposing a tax rate t proportional to income. 1. the proportional tax will exacerbate the effect of a shock to consumer confidence on output. II. the proportional tax will result in a smaller level of aggregate output. I and II are both true I is true but not II I and II are both false II is true but not