Congress is about to pass Infrastructure Investment and Jobs Act. This $1 trillion bipartisan infrastructure bill, includes:

a)$1 trillion increase of government spending (G) on the US infrastructure and

b)a tax (T) increase ("strengthening tax enforcement for cryptocurrencies")

How will these policies impact the US output, interest rate, and Dollar-Chinese yuan () exchange rate in the short run?What will happen and state whether the dollar will appreciate, depreciate or remain stable.Assume that Chinese fiscal and monetary policy remain unchanged and that the Chinese government in no way intervenes to affect the dollar-yuan exchange rate.

What would be the net short-run effect of this bill given the fact that the Congressional Budget Office projected that the infrastructure bill creates $256 billion deficit, i.e. government spending (G) exceeds the collected taxes (T)by $256 billion

Hints:

First consider the short-run impact of the $1 trillion increase of government spending (G) on the infrastructure (building bridges and roads with federal money) on the US output and Dollar-Chinese yuan () exchange rate. Consider the effect of an increase of government spending on the infrastructure only and ignore the tax cut effect!)

Second, consider the short-run tax increase only impact on the US output and Dollar-Chinese yuan () exchange rate and ignore the impact of change on government spending.

What would be the net short-run effect of this bill given the fact that the Congressional Budget Office projected that the infrastructure bill creates a $256 billion deficit, i.e. government spending (G) exceeds the collected taxes (T)by $256 billion