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Suppose that Congress passes a constitutional amendment requiring the U.S. government to maintain a balanced budget at all times. Thus, if the government wishes to
Suppose that Congress passes a constitutional amendment requiring the U.S. government to maintain a balanced budget at all times. Thus, if the government wishes to change government spending, it must always change taxes by the same amount, that is G= T. Does the constitutional amendment imply that the government can no longer use fiscal policy to affect employment and output? (Hint: analyze a "balanced budget" increase in G, one that is accompanied by an equal tax hike).
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