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Potential problems with counter cyclical fiscal policy

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Reference no: EM132471636

(a) What are the potential problems with counter cyclical fiscal policy?

(b) "A balanced budget fiscal policy is pro-cyclical". Explain with economic reasoning and appropriate diagram(s).

(c) "A fiscal policy of changing both the government spending and taxes by the same amount is not neutral". Explain with a numerical example.

Reference no: EM132471636

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