New findings suggest tax increases reduce real GDP (Romer and Romer, 2008).

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
ChapterD: The Expenditure-output Model
Section: Chapter Questions
Problem 24CTQ: Exercise D24 Compare two policies: a tax cut on income or an increase in government spending on...
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7
Taxes and Real GDP
New findings suggest tax increases reduce real
GDP (Romer and Romer, 2008).
Positive output shocks raise tax revenues.
Difficult to separate the effects of tax changes
from other effects.
Investment falls sharply in response to tax
changes.
Transcribed Image Text:Taxes and Real GDP New findings suggest tax increases reduce real GDP (Romer and Romer, 2008). Positive output shocks raise tax revenues. Difficult to separate the effects of tax changes from other effects. Investment falls sharply in response to tax changes.
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