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Suppose the government decides to decrease spending and

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1. Suppose the government decides to decrease spending and increase taxes in an attempt to decrease its deficit. Is it possible for the Fed to ease the macroeconomic effects of the spending and tax changes? Explain.

2. If the government implements a spending and tax policy in which it promises to neither increase nor decrease spending and taxes, is it still possible for the budget deficit to increase or decrease? Explain.

3. Explain why the implementation lag is generally longer and the response lag is generally shorter for fiscal policy than they are for monetary policy.

Reference no: EM13319548

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