Impact of the Average Tax Rate on the Aggregate Demand (Keynesian Models)

Bulletin of the Georgian National Academy of Sciences, Vol. 6, No. 2, 2012

8 Pages Posted: 3 Dec 2012

See all articles by Iuri Ananiashvili

Iuri Ananiashvili

Ivane Javakhishvili Tbilisi State University - Department of Econometrics

Vladimer Papava

Ivane Javakhishvili Tbilisi State University

Date Written: December 1, 2012

Abstract

Based on an analysis of a modified version of the standard Keynesian Model of a product market, it is shown that a change in the average tax rate has a complex effect on aggregate demand. Since the parameter of marginal propensities to purchase is easily regulated, by selecting its appropriate value the government can purposefully use a tax increase to stimulate or to reduce aggregate demand.

Keywords: Keynesian model of aggregate demand, average tax rate, marginal propensity to consume, marginal propensity to public purchases

JEL Classification: E12, E62, H21

Suggested Citation

Ananiashvili, Iuri and Papava, Vladimer, Impact of the Average Tax Rate on the Aggregate Demand (Keynesian Models) (December 1, 2012). Bulletin of the Georgian National Academy of Sciences, Vol. 6, No. 2, 2012 . Available at SSRN: https://ssrn.com/abstract=2183744 or http://dx.doi.org/10.2139/ssrn.2183744

Iuri Ananiashvili

Ivane Javakhishvili Tbilisi State University - Department of Econometrics ( email )

1, Chavchavdze Ave
Building I
Tbilisi, 0218
Georgia

Vladimer Papava (Contact Author)

Ivane Javakhishvili Tbilisi State University ( email )

1, Ilia Tchavtchavadze avenue
Tbilisi, Tbilisi 0179
Georgia
+995 32 222-0241 (Phone)
+995 32 222-5107 (Fax)

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