Problem:
Suppose the government proposes to cut taxes while maintaining the current level of government expenditures. To finance this deficit, it may either a) sell bonds to the public, or, b) print new money (via Federal reserve cooperation).
What are the likely effects of each of these alternatives on each of the following?
a) interest rates
b) consumer spending
c) business investment
d) aggregate demand.
Would Keynesians , monetarists, and supply-siders give the same answers?