3. a) Suppose that the macroeconomic equilibrium is determined in the closed economy (AE = C+I +G). Show and explain the effects of an increase in marginal tax rate (t) on macroeconomic equilibrium. b) Why do you think increase in government expenditure causes crowding-out effect (use graphs when necessary

3. a) Suppose that the macroeconomic equilibrium is determined in the closed economy (AE = C+I +G). Show and explain the effects of an increase in marginal tax rate (t) on macroeconomic equilibrium. b) Why do you think increase in government expenditure causes crowding-out effect (use graphs when necessary

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section11.A: Graphical Treatment Of Taxes And Fiscal Policy

Problem 1DQ

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