For This Question,assume That Taxes Are Independent of Income (I

question 46

Essay

For this question,assume that taxes are independent of income (i.e.,the income tax rate is zero).Now suppose that fiscal policy makers wish to decrease equilibrium output by $500 billion.Further suppose that policy makers can choose one of the following two options: (1)change in government spending; or (2)change in taxes.Compare and explain the relative size of the changes in government spending and taxes needed to obtain this desired change in output.

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