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In: Economics

Suppose government puts a tax on consumption at rate τc, that is, τc fraction of consumption...

Suppose government puts a tax on consumption at rate τc, that is, τc fraction of consumption purchases goes to the government. What happens to IS and LM curves, aggregate demand, consumption, net exports, real exchange rate, nominal exchange rate, and price level in the short run and from short run to long run? Answer these questions under fixed and floating exchange regimes separately. Assume an open market economy.

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Rahul Sunny answered 2 years ago
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