Using the Keynesian model,the effect of an increase in the effective tax rate on capital would be to cause ________ in the real interest rate and ________ in output in the short run.
A)a decrease; a decrease
B)a decrease; no change
C)an increase; an increase
D)no change; a decrease

Question

Quizplus · Accepted Answer

According to the Keynesian model, an increase in effective tax rate on capital would lead to a decrease in investment, which would shift the aggregate demand curve leftward. This would initially cause a decrease in both the real interest rate and output in the short run.

Using the Keynesian Model,the Effect of an Increase in the Effective