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Problem: Paul Ryan has proposed replacing the corporate income tax, which is among the highest in the industrialized world, with what he calls a business consumption tax but what is in effect a tax of a firm's value-added. He proposes that this tax be set at 8.5%, which is half that of the value0adderd taxes in the rest of the industrialized world.
Required:
Question 1: Explain the potential supply-side effects of Paul Ryan's tax plan,
Question 2: Where on the Laffer curve do you think Paul Ryan believes the U.S. economy lies?
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