Solution-Budget deficit by making across-the-board cuts

Budget deficit by making across-the-board cuts

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Reference no: EM131441665

Assume the economy is initially in a long-run equilibrium. Suppose Congress and the President decide to reduce the budget deficit by making 10% across-the-board cuts to every government program tomorrow (and for the record, 10% is a very big number in this context). Use the AD/AS model to describe the effect this policy will have on inflation and real GDP in the short run and the long run.

Reference no: EM131441665

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Budget deficit by making across-the-board cuts

Reference no: EM131441665

Reference no: EM131441665

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