Here is some information about an economy. Use this information to fix the economy using variable taxes. What is the effective new tax rate that should be charged in this economy? Remember to show full calculations and maintain 3 decimal places in your calculations.

•Autonomous Consumption = $7,500

•MPC = 0.85

•Variable tax rate = 15%

•Government expenditures = $10,000

•Investment = $15,000

•Trade deficit = $2,500

•Fixed taxes = $0

•YF (the full employment level of GDP) = $100,000

Answer rating: 100% (QA)

To fix the economy using variable taxes we need to adjust the variable tax rate to achieve full empl... View the full answer