Economic Policy Impact Analysis
A small country is considering a new tax policy to fund public infrastructure. The proposed policy includes a 10% tax on all personal income and a 15% tax on all goods and services purchased. The country's economists estimate that the average output per worker is $80,000 per year. Based on this proposed policy, calculate the total amount of output per worker that will be collected by the government as tax revenue. Then, determine the amount of output that remains to be distributed between the worker's wages and the employer's profits. Explain the relationship between these two calculated values and the total output.
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Ch.2 Unemployment, wages, and inequality: Supply-side policies and institutions - The Economy 2.0 Macroeconomics @ CORE Econ
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