Question suppose during some war in the future military, Ask an Expert

Economics

Question: Suppose during some war in the future, military expenditures increased by 3% of GDP. Describe optimal Fed policy under the following scenarios. (Hint: what happens to consumer and capital spending after the war starts?)

(A) The government pays for the war with a tax increase.

(B) The deficit rises by the full amount of the increase in defense spending.

(D) The war causes oil prices to double.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M93115201

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