Sneome tax es y as an Automate Stabilizer Sopp! ementoryy Adote the main idea is that an Imposition f meoma faxes ensures thet chonges in ovlput rena proderate Solloceing a change In autenomers demand, We've tne class hat an Inclusion of preeportionll ‘ore. ADE shocon 1 lancome tax leads +o the Follocing ex pression apeAtel-bY [equation 20 In The slides] Comparce ib with the CoS cohene Shere 1s nO proportional neoma tax & ape Arcy Tequetion al As ell-*) So > Ane slope of AD In equation 22 is flatiee (ie nan thet of AD eqpotion 2. ADSuppose “Shot invthally here is nat preoperctional Income tox . The relevant curve 1s AD The intecsection point between 4D) avd the “he 45° dege eqzuililorcion outpot is suddenly become pessimiste and celll ahift cdooon to ADz and ce line (point A) shooos Tthecd the Y,. Woeo Hf Investors cus decom Investrront , ADI he new ecpuillbriom output eduction tn outpot PS eee Now consicerc the cose cohene we have preopertiowl te lemon Income. “tare: Vere oure aggeegy Jl be Lladter. You should easily set TS AD) is flaliterc then AD. Meee 's Wy, do the. curve shou’ cn ane rat Sine eqpibrien ovtpet ieome. m7 Investors suddenly rbecoure. cool shift down to ADs The Vi code rcectuction uncle proportional ieee ec agen pessimist ADY pao ecpuiloriom output is jm ovtpot ts Y/A Nel, Notice That Yow eM. preans thet Pvetvedtion Ww ootpot is less This orHonal \ncome Tax. severe coho here is PrP