Question

Some economists want to decrease to Other economists want to reduce the size of the deficit by raising of government spending to reduce government budget deficits taxes. Compare these two points view using aggregate supply aggregate program using a correctly lae and aggregate demand analysis. Illustrate the effects of each aggregate demand (AD) and short-run aggregate supply (SRAS) graph

Answer 1

When governemnt decrease spending or increase tax , the fiscal policy becomes contructionary fiscal policy.

Some economist want to decrease government spending to reduce government budget deficit If government spending decreases, Aggregate demand is the economy reduces, so AD curves shifts to the left, as a result prose will decreases and output in the market decreases and employment will decreases below the previous employment level components of AD = C + I + G + (x - m) without increasing other components decreasing G will cause economic downtown which is not good for an economy . Some economists want to increase tax to reduce government budget defect this policy is way maul helpful than the previews one when tax, tax increases consumers have less dispersible increase to spend, so, consumption will shift to the left and output decreases now, many shifted from consumers to government as resume of tax . AD = C + I + G + (x - m) . so,