The government decides that the use of credit cards is bad, and introduces a tax on credit

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The government decides that the use of credit cards is bad, and introduces a tax on credit card balances. That is, if a consumer or firm holds a credit card balance of X (in real terms), he or she is taxed tX, where t is the tax rate. Determine the effects on the equilibrium price and quantity of credit card balances, the demand for money, and the price level, and explain your results.

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Macroeconomics

ISBN: 978-0132991339

5th edition

Authors: Stephen d. Williamson

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