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What is wrong with given argument

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Suppose that the real interest rate in an economy is 6%. Real GDP grows by 2.75% a year. The new chief economic adviser to the government argues that a tax increase of $20 billion will generate huge bene?ts because the real interest rate is much larger than the growth of GDP, so that tax rates will be lower on future generations forever. What is wrong with this argument?

Reference no: EM13887928

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