Suppose the incoming Biden administration permanently increases taxes and government purchases by equal amounts. 1)What will be the impact (if any) on output in the short run? 2)What will be the impact on the economy’s normal real interest rate (r*) and normal investment (I*, which is the same as normal saving, S*)?
Suppose the incoming Biden administration permanently increases taxes and government purchases by equal amounts. 1)What will be the impact (if any) on output in the short run? 2)What will be the impact on the economy’s normal real interest rate (r*) and normal investment (I*, which is the same as normal saving, S*)?
Chapter8: The Keynesian Model
Section: Chapter Questions
Problem 20SQ
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Suppose the incoming Biden administration permanently increases taxes and government purchases by equal amounts. 1)What will be the impact (if any) on output in the short run? 2)What will be the impact on the economy’s normal real interest rate (r*) and normal investment (I*, which is the same as normal saving, S*)?
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