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Keynesian Model with Tax shock. Derive the equilibrium output (Y*) and interest rate (r*) in the...

Keynesian Model with Tax shock.

Derive the equilibrium output (Y*) and interest rate (r*) in the ISLM model.

a. How does output change if tax rate increases?

b. Explain how c2 affects the relationship between output and tax rate.

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Expert Solution

Rahul Sunny answered 2 years ago
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