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Macroeconomics by David Tuerck

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CHAPTER 8

Taxes and the Macroeconomy

In the introduction to this book, I mentioned the fact that economists have a reputation for disagreeing among themselves—a state of affairs that some believe disqualifies them from commenting on anything. In fact, there are many propositions on which economists generally agree, if only implicitly. One is the law of diminishing returns. You cannot, as someone has pointed out, grow all the world’s wheat in a single flower pot. Presumably, also, no one would advocate raising the minimum wage to $100 an hour.1

There is another proposition that can’t be doubted, and this one is that at some point a further increase in the tax rate on whatever it is that is being taxed will cause the government to bring in less ...

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