In: Economics
Suppose the US economy is currently in long-run equilibrium at potential output. A tax overhaul lowers corporate income taxes and adds $1.4 trillion to the national debt. Using economic reasoning and models as evidence, evaluate and discuss how this event will likely impact output, employment, interest rates and the price level in the A) short run and B) long run. Be sure to address any assumptions you make as well as the perspective you take.