Suppose that an increase in marginal tax rates on


Suppose that an increase in marginal tax rates on individual income affects both aggregate demand and aggregate supply. Briefly describe the effect of the tax increase on equilibrium real GDP and the equilibrium price level. Will the changes in equilibrium real GDP and the price level be larger or smaller than they would be if the tax increase affected only aggregate demand? Briefly explain.

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Microeconomics: Suppose that an increase in marginal tax rates on
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