Macroeconomic Model of Laffer-Keynesian Synthesis

The article presents a macroeconomic equilibrium model in which aggregate demand and aggregate supply are considered not in relation to the price level, as is traditionally done, but in terms of functions dependent on the average tax rate. The concepts of optimal and equilibrium tax rates are introduced. In the former case, aggregate supply is maximum, while in the latter case aggregate demand and supply coincide. Based on an analysis of the model, it is shown that when the government tries to maintain the equilibrium average tax rate at a fixed level, the optimal tax rate becomes dependent on the price level, and an appropriate change in aggregate demand may lead to approximation of the optimal rate to the equilibrium rate. It is also demonstrated that each given value of the equilibrium tax rate can be matched with a set of functions and curves of aggregate supply and the national budget's tax revenues.