Line item spending amounts

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Reference no: EM139121

Q1. Assume which Parliament passes a law to permanently cut taxes starting the next year. Assuming which consumers are not Ricardian, when would consumers adjust their consumption spending according to:

a. The Keynesian consumption function?

b. The Fisher two-period model with binding borrowing constraints?

c. The random-walk hypothesis (the permanent-income hypothesis with rational expectations) with no binding borrowing constraint?

Q2. Knowing the current state of the economy, Illustrate effect, if any, do you think fiscal policy had on the changes to these line item spending amounts? Explicate in 2 paragraphs, cite your source.

Reference no: EM139121

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