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Effects of Fiscal Policy in the Long Run Suppose that the government suggests cutting both taxes...

Effects of Fiscal Policy in the Long Run

Suppose that the government suggests cutting both taxes and government purchases by equal amounts. Use the classical model to illustrate graphically what happens to the real interest rate and national saving in response to this balanced-budget change. In addition, state and explain what the long-run effects of this policy would be on private saving (Sp), investment (I), real interest rate (r), and consumption (C).

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Rahul Sunny answered 8 months ago
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