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johnpaul92 johnpaul92
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8 years ago
Consider a large open economy that has a positive current account balance.
(a)   Suppose the domestic government increases the tax rate on firm revenues. Draw a diagram to explain the effects on the world real interest rate, saving in each country, investment in each country, and the current account balance in each country in equilibrium. Explain your work.
(b)   In addition to the tax increase in part (a), suppose now that the foreign government increases lump-sum taxes on individuals. Draw a new diagram to incorporate the overall effects of both tax changes and explain the effects (from the initial equilibrium with neither tax change) on the world real interest rate, saving in each country, investment in each country, and the current account balance in both countries. Explain your work.
Textbook 
Macroeconomics

Macroeconomics


Edition: 8th
Authors:
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supamansupaman
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8 years ago
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johnpaul92 Author
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#2
8 years ago
Wow, you answered what I thought was impossible to answer, thank you!
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#3
8 years ago
Glad to be part of your success Wink Face
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