Question

The new federal government budget calls for decreased corporate tax rates and additional government spending on “infrastructure”. Your job is to (in a 1-2 page essay) a) describe how these actions (using IS-LM and AS-AD) should work through the economy to achieve the government’s goal of “helping the economy”; b) what economic framework/assumptions are you (and presumably the government) basing this “chain of causation” on? c) there are those that disagree with these actions, why? What assumptions or beliefs about the economy led them to disagree with these actions?

Answer 1

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