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If the government increases its expenditure by $100, it has to increase taxes by $100. Explain whether you agree or disagree with the above statement.

If the government increases its expenditure by $100, it has to increase taxes by $100. Explain whether you agree or disagree with the above statement.

In your answer, carefully discuss the effects of a change in government expenditure and a change in taxes on the planned aggregate expenditure.

(Note: you can assume this change is in exogenous taxes).

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