Suppose the Government Increases Spending on the War on Drugs

question 107

Essay

Suppose the government increases spending on the war on drugs by one-half a percent of GDP.
(A) Suppose no ather policy accomparies this increase in spenting. Describe this policy's effect an interest rates ant an cansumption investment and net exparts as a share of GDP.
(B) Suppose, because of a balanced budet agrement the funds far this policy must came fram funds initially earmarked far ather spenfing proprans. Describe this policy's effect an interest rates and an cansumptidn, investment and net exports as a share of GDP.
(C) Suppase the gavernment decides ta adopt anational sales tax to pay far the higher government spending. Describe this policy's effect an interest rates and an the four shares of GDP

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