Potential Long-Term Productivity Effects of Taxation on the Price-Setting Curve
While higher taxes typically shift the price-setting (PS) curve down in the short run, there is a potential long-term counter-effect. If the government invests tax revenue in areas that boost labor productivity, such as improved health, education, or infrastructure, the resulting increase in output per worker can eventually lead to an upward shift of the PS curve.
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Ch.4 Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
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Potential Long-Term Productivity Effects of Taxation on the Price-Setting Curve
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