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In 2010 the Financial Times reported that the Mexican Finance minister called for a third change to the country's taxes in as many years. (Financial Times, March 19, 2010) The result would be an increase in tax revenue for the Mexican federal government. Assume that Mexico is a small open economy. How will the increased taxes affect investment, savings and the real exchange rate for Mexico? Show graphically and explain. (Assume no other changes in the economy.) Also, how will the higher taxes in Mexico affect the world interest rate? Explain.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91241270

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