Order the answer to: Although our development of the Keynesian cross in this chapter

Order the answer to: Although our development of the…

Question	Although our development of the Keynesian cross in this chapter assumes that taxes are a fixed amount, in many countries taxes depend on income. Let’s represent the tax system b y writing tax revenue as T = + tY, Where T ? and t are parameters of the tax code. The parameter t is the marginal tax rate: if income rises by $1, taxes rise by t × $1. a. How does this tax system change the way consumption responds to changes in GDP? b. In the Keynesian cross, how does this tax system alter the government-purchases multiplier? c. In the IS–LM model, how does this tax sys-tem alter the slope of the IS curve?
Subject	business-economics

Question

Although our development of the Keynesian cross in this chapter assumes that taxes are a fixed amount, in many countries taxes depend on income. Let’s represent the tax system b y writing tax revenue as
T = + tY,
Where T ? and t are parameters of the tax code. The parameter t is the marginal tax rate: if income rises by $1, taxes rise by t × $1.
a. How does this tax system change the way consumption responds to changes in GDP?
b. In the Keynesian cross, how does this tax system alter the government-purchases multiplier?
c. In the IS–LM model, how does this tax sys-tem alter the slope of the IS curve?

Subject

business-economics

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