Economics 1022A/B Chapter Notes - Chapter 29: Real Wages, Potential Output, Tax Wedge

• School: Western University
• Department: Economics
• Course: Economics 1022A/B
• Professor: Bruce Hammond

Document Summary

The federal budget in 2013: revenues, come from, personal income taxes, corporate income taxes. Investment income: outlays, transfer payments, debt interest. The budget in historical perspective: deficit and debt, government debt is the total amount that the government borrows, it is the sum of past deficits minus past surpluses. Supply-side effects of fiscal policy: fiscal policy has important effects on employment, potential gdp, and aggregate supply- called supply side effect, an income tax changes full employment and potential gdp. Full employment and potential gdp: the effects of an income tax in the labour market, the tax increases marginal cost of working. The gap created between the before tax and after tax wage rate: the quantity of labour employed decreases. The effects of the income tax: when the quantity of labour employed decreases, potential gdp decreases, the supply-side effect of a rise in the income tax decreases potential. Effects of a tax on capital income.