Although our development of the Keynesian cross in this chapter assumes that taxes are a fixed amount, in many countries taxes depend on income. Let's represent the tax system by writing [tex]\mathrm{tax}[/tex] revenue as [tex]\mathrm{T}=\mathrm{T}+\mathrm{t} Y[/tex] where [tex]\mathrm{T}[/tex] and [tex]\mathrm{t}[/tex] are parameters of the [tex]\operatorname{tax}\space [/tex] code. The parameter [tex]t[/tex] is the marginal tax rate: if income rises by 1 , taxesriseby1.a. How does this tax system change the way consumption responds to changes in GDP?b. In the Keynesian cross, how does this tax system alter the government-purchase multiplier?c. In the IS-LM model, how does this tax system alter the slope of the IS curve?
