What happens in classical economics theory if government raises taxes?

1 Comment so far

  1. MK6 on March 23rd, 2009

    What it's doing is shifting the spending power from individuals to the govn't.

    So innovation / business creation may go down, -if folks think they can't keep what's theirs.

    Other than that, – it appears it's a closed system. Money is not leaking in nor out of the system, – just who spends it, or who has it, and doesn't spend it (investment).

    If you actually talked about lowering interest rates, – then folks would 'pull' money from their own future, – and spend it today (more-so). Hence that would be an increase in the (virtual) money supply (today).

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