The us government decides to reduce the government budget, Business Economics

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The us government decides to reduce the government budget

The US government decides to reduce the government budget deficit by increasing taxes and keeping government expenditures at the existing level.

What are the effects of increasing taxes in the short and medium run for the US economy? The US economy should be analysed as an open economy with flexible exchange rates. Hint: The AD relationship in the medium run is: Y = Y(M/P, EP/P*, G, T)

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Business Economics: The us government decides to reduce the government budget

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