Hi there, I am needing help with these assignment questions, particularly question d.

Assume that there is no law that requires the government to maintain a balanced budget at all times. Assume further that the government cuts taxes temporarily which leads to a budget deficit.

c) What is the overall effect on Y and E in the short-run if people expect that the government

will finance its budget deficit by printing extra money in the future? Explain with the help

of a figure. (3 marks)

d) Relative to part c), compare the effect on Y and E in the short-run if there is only a

temporary decrease in taxes without the expectation that the government will monetize the

debt in the future?