Compare the impact on equilibrium real GDP of a same sized decrease in taxes and increase in
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Compare the impact on equilibrium real GDP of a same sized decrease in taxes and increase in government expenditure on goods and services.
Suppose the Trump tax cuts remain in place.
Compared to a situation with no tax change, the Tax Policy Center estimates that after tax incomes of households in the bottom fifth will rise 0.4%; the second fifth, up 0.9%; the middle fifth, up 1.3%; fourth fifth, up 1.4%; and the top fifth up 2.3%.
Fact: Middle and low income earners spend almost all their disposable incomes. High income earners save a significant part of their disposable incomes.
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