tax multipliers

Why Does The Government Raise Taxes?

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Why Does The Government Raise Taxes? To dampen economic growth and inflationary pressure, the government can increase taxes and keep spending constant, or decrease spending and keep taxes constant. To stimulate growth and reduce unemployment, the government can decrease taxes and keep spending constant, or increase spending and keep taxes constant. Why a government might

How Do Increased Taxes Affect Aggregate Supply?

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How Do Increased Taxes Affect Aggregate Supply? If a tax cut raises work effort, it increases Lbar and, thus, increases the natural rate of output. … It shifts the long-run aggregate supply curve outward because the natural rate of output rises. The effect of the tax cut on the short-run aggregate supply (SRAS) curve depends