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In a large open economy wil perfect capital mobility, what's the effect of an increase of effective corporate tax? does it shift desired saving curve or investment curve? or both?

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In a large open economy wil perfect capital mobility, what's the effect of an increase of effective corporate tax? does it shift desired saving curve or investment curve? or both?
Answered Same Day Dec 22, 2021

Solution

David answered on Dec 22 2021
124 Votes
Answer:
An Increase in Corporate tax is an increase in Capital Tax; it increases the cost of Capital.
Domestic demand for Investments decreases. As a result, there is a possible interest rate
decrease. However Law of one price in international capital market, and perfect capital
mobility...
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