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Government decreases current tax, while holding government spending in the present and future constant. (a) How does this effect aggregate output, employment and the real wage? What is the multiplier and how does it differ from the government expenditure multiplier? (b) Now, suppose that there are credit market imperfections in the market for consumer credit, for example due to asymmetric information in the credit market. Repeat part (a), and explain any differences in the answers in parts (a) and (b).

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9686070

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