4. A constitutional amendment has been proposed that would force Congress to balance the budget each year (that is, outlays must equal revenues in each year). Discuss some advantages and disadvantages of such an amendment. How would a balancedbudget amendment affect the following, if in the absence of such an amendment the Federal government would run a large deficit?

a. The use of automatic stabilizers.

b. The ability of Congress to “smooth” taxes over time.

c. The ability of Congress to make capital investments.

b. The tax law is changed so that income of less than $6000 is untaxed, income from $6000 to $20,000 is taxed at 20%, and income of more than $20,000 continues to be taxed at 30%. Repeat Part (a).

c. How will the tax law change in Part

(b) affect the labor supply of the person initially earning $16,000? How will it affect the labor supply of the person earning $30,000?