Q7 Suppose the current administration decides to decrease government expenditures as a means to cut the existing government budget deficit (Answers with Graphs) According to the aggregate demand and supply analysis, what would be the effect of such a measure in the short run Describe changes in the inflation rate and output level What would be the effect on the real interest rate, inflation rate, and output level if the Federal Reserve decides to stabilize the inflation rate

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Question: Q7. Suppose the current administration decides to decrease government expenditures as a means to cut the existing government budget deficit. (Answers with Graphs) According to

Q7. Suppose the current administration decides to decrease government expenditures as a means to cut the existing government budget deficit. (Answers with Graphs)

According to the aggregate demand and supply analysis, what would be the effect of such a measure in the short run? Describe changes in the inflation rate and output level.
What would be the effect on the real interest rate, inflation rate, and output level if the Federal Reserve decides to stabilize the inflation rate?

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