–a) An increase in gover

–a) An increase in gover

–a) An increase in government spending and taxes represent a change in the demand for output. Under classical assumptions supply creates its own demand. Therefore,b)do you expect to be affected by a change in government speding under a balanced budget rule?c) Assume that, which implies that taxes go up by an equal amount, what effect will this have on the?d) How does your answer depend on the?

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