Suppose that, instead of a fixed level of taxes, we had an income tax so that T = t 1 Y where t 1 was the income tax rate. Following the procedure of Section 5.4 , derive an expression for equilibrium...

Suppose that, instead of a fixed level of taxes, we had an income tax so that

T = t₁Y

where t₁
was the income tax rate. Following the procedure of Section 5.4 , derive an expression for equilibrium income Y analogous to equation (5.14) for this case in which the level of tax collections depends on income. What is the expression equivalent to the autonomous expenditure multiplier [1/(1 - b)] for this case of an income tax?