Suppose we start with a general equilibrium, and there is a decrease in the effective tax rate on capital. What is the short-term effect of this shock? 1. real interest rate rises, and output rises 2. real interest rate rises, and output drops 3. real interest drops, and output rises 4. real interest rate drops, and output drops 5. None of the above

Suppose we start with a general equilibrium, and there is a decrease in the effective tax rate on capital. What is the short-term effect of this shock? 1. real interest rate rises, and output rises 2. real interest rate rises, and output drops 3. real interest drops, and output rises 4. real interest rate drops, and output drops 5. None of the above

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter23: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 9PA

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