Question: The government undertakes a significant fiscal contraction redu
The government undertakes a significant fiscal contraction, reducing government purchases by $100 billion and increasing tax revenues by $100 billion through a higher effective corporate tax rate. In this case, I understand that the saving curve shifts to the right and the investment curve shifts to the left, butwould the saving curve shifts more? Could you explain by saving equations? S = Y – C – G, Sg = T – G, Sp = Y – T – C.
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