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Suppose that an investment tax credit is stated to be temporary in nature, and the credit will be 10% on newly acquired capital (investment) equipment and will last just one year only.
a. What would you predict to be the effect of this tax credit in the long-run (say, 5 or 6 years)?
b. What would you predict to be the effect of this tax credit in the current year and the following year?
c. How would your answers to parts (a) and (b) differ if the tax credit were permanent?
What are the effects of the fiscal stimulus on the macroeconomy
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If the indifference curves are straight lines with slope s, and the budget constraint is given by: x*p1+y*p2 = m, then describe the optimal choice of the consumer.
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