If fiscal policymakers alter tax rates and it causes consumption and investment to change, then fiscal policy is said to impact the ___________. However, if tax rate changes alter production, then fiscal policy is said to impact the ___________.
Added by Phillip C.
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Step 1: If fiscal policymakers alter tax rates and it causes consumption and investment to change, then fiscal policy is said to impact the \textbf{aggregate demand}. Show more…
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How would a consumption tax affect savings, investment, interest rates and economic growth? Some policymakers and economists have suggested that the federal government shift from relying on the income tax to relying on a consumption tax. Under the income tax, households pay taxes on all income earned. Under a consumption tax, households pay taxes only on the income they spend. Use the market for loanable funds model to illustrate and explain the effect on savings, investment, the interest rate, and economic growth from switching from an income tax to a consumption tax.
Andrew D.
'When real interest rates rise_ consumption will shift: downward if income rises as well downward if there is saving upward if the substitution effect outweighs the income effect upward if the income effect outweighs the substitution effect'
Manasvee S.
'Fiscal policy refers to the: deliberate changes in government spending and taxes to stabilize domestic output; employment; and the price level: altering of the interest rate to change aggregate demand: deliberate changes in government spending and taxes to achieve greater equality in the distribution of income: fact that equal increases in government spending and taxation will be contractionary:'
Prashant B.
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