Suppose the government is considering a tax policy that will reduce taxes by $100. In the economy,

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Suppose the government is considering a tax policy that will reduce taxes by $100. In the economy, households consume 80% of each additional dollar earned. Assume that the tax cut has no effect on GDP(Y).

(a) How will this tax cut affect consumption?

(b) Calculate the change in private savings.

(d) What will happen to the current account as a result of this policy?

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Microeconomics

ISBN: 978-1259163531

1st edition

Authors: Dean Karlan, Jonathan Morduch

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Posted Date: Apr 02, 2019 10:22 AM

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Suppose the government is considering a tax policy that will reduce taxes by $100. In the economy,

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Microeconomics

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