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

Suppose government puts a tax on investment at rate τ. That is, you get only 1...

Suppose government puts a tax on investment at rate τ. That is, you get only 1 − τ apple tree next period if you invest one apple this period. Derive the investment demand equation (analog of Equation 4.1 in Lecture 5). What would be the effect of this tax on net exports and real exchange rate in an open economy in long run and very-long run? Explain in detail by showing the changes in the relevant markets.

Suppose government puts a tax on investment at rate τ. That is, you get only 1...

Suppose government puts a tax on investment at rate τ. That is, you get only 1 − τ apple tree next period if you invest one apple this period. Derive the investment demand equation. What would be the effect of this tax on net exports and real exchange rate in an open economy in long run and very-long run? Explain in detail by showing the changes in the relevant markets. Seriously?! thats how the question is asked in the assignment!...

Practice Sales Tax Problemsa. Suppose the government puts a sales tax on textbooks andtells...

Practice Sales Tax Problemsa. Suppose the government puts a sales tax on textbooks and tells publishers they are responsible for paying a $20 tax on every book sold. Without any more information, what would you predict is likely to happen?b. Now suppose that the price elasticity of demand for textbooks is -.3 and the price elasticity of supply is 1.2 . Make specific predictions about how much the price paid by consumers will rise, the price received by publishers will...

Suppose the government of Mascolia is considering replacing its income tax system with a consumption tax....

Suppose the government of Mascolia is considering replacing its income tax system with a consumption tax. Assume that the government's revenue requirement would be the same under either system. (a) How would the base of a consumption tax compare with the base of an income tax? Does this have implications for the magnitude of the tax rate on consumption versus the magnitude of the tax rate on income? Explain. (b) Compare the income tax and consumption tax in terms of...

Suppose government put a tax on renting capital so that firms need to pay τ fraction...

Suppose government put a tax on renting capital so that firms need to pay τ fraction of their capital rental expenses as a tax to government. Drive first-order conditions for capital and labor by solving firm’s maximization problem. What happens in labor, capital and financial markets in short run and long run? Explain in detail by showing the changes in the relevant markets.

uppose the government of Mascolia is considering replacing its income tax system with a consumption tax....

uppose the government of Mascolia is considering replacing its income tax system with a consumption tax. Assume that the government's revenue requirement would be the same under either system. (a) How would the base of a consumption tax compare with the base of an income tax? Does this have implications for the magnitude of the tax rate on consumption versus the magnitude of the tax rate on income? Explain. (b) Compare the income tax and consumption tax in terms of...

Assume the federal government replaces the federal income tax with a sales tax placed on consumption...

Assume the federal government replaces the federal income tax with a sales tax placed on consumption expenditures. Analyze the impact of this tax change on taxation efficiency and equity.

Suppose that the unemployment rate is currently 4.0%. If the government increases tax rates (ceteris paribus),...

Suppose that the unemployment rate is currently 4.0%. If the government increases tax rates (ceteris paribus), what will happen? Answer your question using Keynesian economics. RGDP will fall RGDP will rise RGDP will stay the same RGDP could increase or stay the same RGDP could decrease or stay the same Suppose that people expect the prices of housing to rise. This will cause… Demand and supply for housing to increase Demand and supply for housing to decrease Demand for housing...

Assume the federal government replaces the federal income tax with national sales tax on all consumption...

Assume the federal government replaces the federal income tax with national sales tax on all consumption expenditures. Analyze the impact of this tax change on taxation efficiency and equity. Note that the federal government already collects a nationwide consumption tax through excise taxes on gasoline, liquor, and tobacco.

Why government provide deductibility over tax? Is there any deductibility for consumption tax? If yes, Why?...

Why government provide deductibility over tax? Is there any deductibility for consumption tax? If yes, Why? If no, Why?

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

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Suppose government puts a tax on investment at rate τ. That is, you get only 1...

Suppose government puts a tax on investment at rate τ. That is, you get only 1...

Practice Sales Tax Problemsa. Suppose the government puts a sales tax on textbooks andtells...

Suppose the government of Mascolia is considering replacing its income tax system with a consumption tax....

Suppose government put a tax on renting capital so that firms need to pay τ fraction...

uppose the government of Mascolia is considering replacing its income tax system with a consumption tax....

Assume the federal government replaces the federal income tax with a sales tax placed on consumption...

Suppose that the unemployment rate is currently 4.0%. If the government increases tax rates (ceteris paribus),...

Assume the federal government replaces the federal income tax with national sales tax on all consumption...

Why government provide deductibility over tax? Is there any deductibility for consumption tax? If yes, Why?...