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Lump-sum increase in taxes

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Within the classical model, suppose that there is a lump-sum increase in taxes, for example, $5 per person. Explain and illustrate (ie draw graphs that show) the effects of such a tax increase on each of the following (this does not mean you need a graph for each, but that there are a set of graphs that will show what happens to each of these variables)

a. output

b. the price level

c. the rate of interest

d. saving

e. consumption

f. investment spending

Reference no: EM131177097

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