(Answered) 1 during an economic contraction why is it likely that the

Management Studies

1. During an economic contraction, why is it likely that the federal government budget will move into deficit?

2. Suppose the current equilibrium GDP for a country is $14.5 trillion and potential GDP is $14.3 trillion. Will decreasing government purchases by $200 billion or raising taxes by $200 billion restore the economy to potential GDP? Briefly explain why.

3. Explain what happens to inflation and unemployment during the business cycle.

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