Question: please help me to solve this question It is often argued that a balanced budget amendment would actually be destabilizing. To understand this argument, consider

please help me to solve this question

It is often argued that a balanced budget amendment would actually be destabilizing. To understand this argument, consider the economy in Problem 5 (so there is a rule for taxes). Keep investment constant. a. Solve for equilibrium output. b. Solve for taxes in equilibrium. Suppose that the government keeps a balanced budget by changing spending in line with taxes. Suppose there is a drop in co. c. What happens to Y? What happens to taxes? d. Suppose hat the government cuts spending in order to keep the budget balanced. What will be the effect on Y? Does the cut in spending required to balance the budget counteract or reinforce the effect of the drop in co on output? (Don't do the algebra. Use your intuition and give answer in words.)

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