The Biden administration has announced that it wants to increase the corporate income tax rate from 21% to 28%. The corporate income tax is a tax on corporate profits and can be seen as a tax on the return on capital. This is known as the rental rate of capital, and is the compensation the owners of capital used in the production process obtain. The rental rate of capital is determined in the market for loanable funds.
a) Show the equilibrium in the loanable funds market and demonstrate how the change in the corporate income tax rate affects the equilibrium. Carefully explain your findings.
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Write My Essay For Meb) Show graphically how the change in the loanable funds market affects the equilibrium in the labor market. Carefully explain how the changes work from one market to the next.
c) Show how the equilibrium in the labour market affects the equilibrium in the goods market. Carefully explain how the changes work from the labour market to the goods market.
d) In light of this discussion how do you evaluate the Biden’s administration’s claim that the corporate income tax hike will only affect the richest corporate shareholders?
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