The President's proposals would reduce federal budget deficits, mainly by raising tax revenues. That deficit reduction would reduce output in the short term, but boost it in the long term. The short-term reduction in output would occur primarily because the President's tax proposals would reduce peoples' disposable income and thus their demand for goods and services. The proposals include... imposing a tax on oil and increasing taxes on capital gains and dividends. Based on the text, how can fiscal policy aimed at reducing the federal deficit through tax increases influence consumer spending in the short term?

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The text explains how the Presidents proposed tax increases would influence consumer spending ... View the full answer