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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

How would a balanced budget amendment affect a decision by Congress to grant a tax cut during a recession?

To determine

The effect of a balanced budget amendment on the decision by Congress to grant a tax cut during recession is to be determined.

Explanation

The balanced budget amendment required the government to balance its budget every year. The government’s budget is said to be balanced when the tax revenue of the government equals its expenditure. In such a case, there would be a pressure on the government to avoid deficits and debt. In times of recession, the governments expansionary fiscal policy (of tax cuts and increase in government spending) plays a major role in reviving the economy from recession by stimulating aggregate demand...

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