The us government decides to reduce the government budget, Ask an Expert

Economics

The US government decides to reduce the government budget deficit by increasing taxes and keeping government expenditures at the existing level.

a) What are the effects of increasing taxes in the short and medium run for the US economy?

b) Is it possible to change the natural rate of unemployment (the natural level of output)? How?

The US economy should be analysed as an open economy with flexible exchange rates.

Hint: The AD relationship in the medium run is: Y = Y(M/P, EP/P*, G, T)

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91829277

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