1. On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJ Act”) was passed, cutting the tax rates for corporations very significantly from 35% to 21%.
(a) Using the IS-MP framework, describe what happens to investment and short-run output when there is a large cut in corporate taxes.
(a) The FRED database contains data for Real Gross Private Domestic Investment showing the change in investment year-on-year. Use the FRED database and download the time series. Use quarterly frequency.
(b) In general, has the investment become more or less volatile since 1950?
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