Analyze a balanced budget increase

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Reference no: EM13741022

Suppose that Congress passes a constitutional amendment requiring the U.S. government to maintain a balanced budget at all times. Thus, if the government wishes to change government spending, it must always change taxes by the same amount, that is "G = "T. Does the constitutional amendment imply that the government can no longer use fiscal policy to affect employment and output?

(Hint: analyze a “balanced budget” increase in G, one that is accompanied by an equal tax hike).

Reference no: EM13741022

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