Classical Full Employment ModelIn the context of the Classical Model, graphically illustrate the...

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Classical Full Employment ModelIn the context of the Classical Model, graphically illustrate the impact of a cut in net taxes. You must include all three diagrams with at least one feedback loop.Use landscape orientation.

Neenisha · Accepted Answer

IMPACT OF CUT IN NET TAXES IN CLASSICAL MODEL
If Government cuts the tax rate in an economy, then in context of classical model we can see the following implications:
If the government cut the tax rate, then for a given period the given pre wage rate is (W/P), the after-tax real wage will increase for a given level of pre tax real wage which will further increase the labour supply. 
The First graph illustrates that the cut in tax rate from 40% to 20%,

Classical Full Employment Model In the context of the Classical Model, graphically illustrate the impact of a cut in net taxes. You must include all three diagrams with at least one feedback loop. Use...

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