The new classical model implies that substitution of debt for tax financing a. leaves wealth, and therefore aggregate demand, unchanged because the debt will require higher future tax rates. b. increases aggregate demand and exerts an expansionary effect on real output. c. reduces savings because it increases both the current and future tax liability of households. d. is highly effective against inflation.

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nadiarose1955 nadiarose1955

27-06-2022
Business

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The new classical model implies that substitution of debt for tax financing a. leaves wealth, and therefore aggregate demand, unchanged because the debt will require higher future tax rates. b. increases aggregate demand and exerts an expansionary effect on real output. c. reduces savings because it increases both the current and future tax liability of households. d. is highly effective against inflation.

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anthougo anthougo · Answer 1 · 2022-06-29T15:57:58+02:00

The new classical model implies that substitution of debt for tax financing a. leaves wealth, and therefore aggregate demand, unchanged because the debt will require higher future tax rates.

What is the substitution of debt for tax financing?

The substitution of debt for tax financing is the use of deferred taxes in the form of debt.

Debt financing creates a financial arrangement whereby an entity takes up a secured or unsecured loan to finance a project.

Thus, the new classical model implies that substitution of debt for tax financing a. leaves wealth, and therefore aggregate demand, unchanged because the debt will require higher future tax rates.

Learn more about debt substitution for tax financing at https://brainly.com/question/26496898

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