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Tax

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Calculate and sign the tax multiplier (dY/dt) in the following model. Y = C[(1-t)Y] + I[ i ] + G M = L[i, (1-t)Y] b) Draw an IS-LM diagram and illustrate an initial position. Show the new equilibrium after the increase in ‘t’ assuming that dY/dt = 0. c) Explain why an increase in ‘t’ shifts the LM curve down and to the right

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