LAFFER-KEYNESIAN SYNTHESIS AND THE MACROECONOMIC EQUILIBRIUM
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LAFFER-KEYNESIAN SYNTHESIS AND THE MACROECONOMIC EQUILIBRIUM
Annotation
PII
S0207-36760000525-6-1
Publication type
Article
Status
Published
Edition
Pages
98-119
Abstract
A model of macroeconomic equilibrium is presented in which the aggregate demand and aggregate supply are considered not at the level or prices, as it is done traditionally, but in terms of functions dependent on the average tax rate. The concepts of optimal and equilibrium tax rates are introduced. In the first case the volume for aggregate supply is maximal, and in the latter case the aggregate demand and supply coincide. Based on the analysis of the model it is shown that when the government tries to maintain the equilibrium average tax rate at a fixed level, then the value of optimal tax rate becomes dependent upon the price level and a relevant change in the aggregate demand may lead to the approximation of optimal rate to the equilibrium rate. It is also demonstrated that every given value of the equilibrium tax rate can be matched with a set of functions and curves of aggregate supply and tax revenues of the national budget.
Keywords
Keynesian model of aggregate demand, model of aggregate supply, model of macroeconomic equilibrium, Laffer Curve, Laffer-Keynesian synthesis, optimal tax rate, average tax rate
Date of publication
30.09.2010
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0
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346
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