Monetary effects of a consumption tax
This paper analyzes the short-run effects of a consumption tax increase (VAT or national sale tax) on aggregate demand. Because it increases the prices paid by consumers relative to the prices received by suppliers, a consumption tax affects the supply of real money balances, in addition to reducing expenditures. Hence, when a consumption tax replaces an income tax so as to maintain a balanced government budget, the net effect can plausibly be contractionary. Copyright 2004 Blackwell Publishing Ltd
Year of publication: |
2004
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Authors: | Holmes, James M. ; Smyth, David J. ; Hutton, Patricia A |
Published in: |
Pacific Economic Review. - Wiley Blackwell. - Vol. 9.2004, 1, p. 75-79
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Publisher: |
Wiley Blackwell |
Saved in:
freely available
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