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Question from Past Macroeconomics Qualifying Exam (Fall, 2005 - Question two) at George Mason UniversityEdit

Tax cuts are generally easy policies to implement because politicians use them to increase their popularity among voters.

  • (a). Name and derive a model in which a tax cut leads to an increase in output.
  • (b). Name and derive a model in which a tax cut leads to a decrease in output.
  • (c). Name and derive a model in which a tax cut leads to no change in output.
  • (d). Which of these models do you think best explains the reality of how tax cuts affect economic activity? Explain.

AnswerEdit

  • (a).
  • (b).
  • (c).
  • (d).

Other QuestionsEdit

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