Government moves to reduce budget deficit

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Suppose a government moves to reduce a budget deficit. Using the model developed in class: a) Graphically illustrate the impact of reducing the government’s budget deficit by increasing (lumpsum) taxes on household income. Be sure to label: i. the axes; ii. The curves; iii. The initial equilibrium values; iv. The direction the curves shift; v. the terminal equilibrium values. b) State in words what happens to: i. The real interest rate ii. National saving iii. Investment iv. Consumption v. Output

Reference no: EM13863459

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