Final answer:
Tax changes and their impact on the economy are analyzed using models like the aggregate expenditure and Keynesian models, but it is important to consider other economic variables that may change simultaneously. It is a complex process requiring careful analysis.
Step-by-step explanation:
In economics, the impact of changes in net taxes on the economy can be analyzed using various models, such as the aggregate expenditure model or the Keynesian model. These models consider factors like consumption, government spending, investment, and exports to determine the effects of tax changes on real GDP.
For example, in the Keynesian model, assumptions are made about the level of consumption, taxes as a proportion of real GDP, marginal propensity to save, investment, and government spending. By completing tables with relevant values and applying these assumptions, economists can estimate the equilibrium level of output and the effects of tax changes.
However, it's important to note that in reality, other economic variables may also change alongside tax policies, making it difficult to isolate the exact impact of tax cuts. It's a complex and messy process, requiring careful analysis and consideration of multiple factors.