Suppose the government unhappy with the budget deficit, Econometrics

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Suppose the government unhappy with the budget deficit

You are given the following information about an economy

a. Find equilibrium GDP and the budget deficit.

b. Suppose the government, unhappy with the budget deficit, decides to cut government spending by precisely the amount of the deficit you just found. What actually happens to GDP and the budget deficit, and why?

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Econometrics: Suppose the government unhappy with the budget deficit

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Econometrics: Suppose the government unhappy with the budget deficit

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