A government enacts a new, higher sales tax on all goods and services. Assuming that labor productivity and the intensity of competition among firms do not change, what is the direct consequence of this policy on the real wage that firms can offer, and how does this affect the price-setting curve?
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Ch.2 Unemployment, wages, and inequality: Supply-side policies and institutions - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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Ch.4 Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
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A government enacts a new, higher sales tax on all goods and services. Assuming that labor productivity and the intensity of competition among firms do not change, what is the direct consequence of this policy on the real wage that firms can offer, and how does this affect the price-setting curve?
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Impact of Income Tax on the Price-Setting Curve
A government increases the tax rate on corporate profits. According to the standard model where the intensity of market competition remains unchanged, this policy will cause the price-setting curve to shift upwards because firms will increase their prices to maintain their after-tax profit levels.