In a linear aggregate demand model: A lower tax rate leads to a new equilibrium at higher output by shifting the AD curve upwards. Oc_1(1-t) + m is the slope of the AD line in the 45-degree diagram. 1/(1 - c_1(1-t) + m) is the size of the multipler. None of these are true.
In a linear aggregate demand model: A lower tax rate leads to a new equilibrium at higher output by shifting the AD curve upwards. Oc_1(1-t) + m is the slope of the AD line in the 45-degree diagram. 1/(1 - c_1(1-t) + m) is the size of the multipler. None of these are true.
Chapter9: Aggregate Expenditures
Section: Chapter Questions
Problem 8E
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Transcribed Image Text:In a linear aggregate demand model:
A lower tax rate leads to a new equilibrium at higher output by shifting the AD
curve upwards.
Oc_1(1-t) + m is the slope of the AD line in the 45-degree diagram.
1/(1 - c_1(1-t) + m) is the size of the multipler.
None of these are true.
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