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The social security system levies a tax on workers and pays benefits to the elderly. Suppose that Congress increases both the tax and benefit. For simplicity, assume that congress announces that the increase will last for only one year.

a. How do you suppose this change would affect the economy? Think about the marginal propensities to consume of the young and the old

b. Does your answer depend on whether generations are altruistically linked?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M940220

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