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A new head of state, who promised during the campaign that he would cut taxes, has just been elected.
A new head of state, who promised during the campaign that he would cut taxes, has just been elected. People trust that she will keep her promise, but expect that the tax cuts will be implemented only in the future. Determine the impact of the election on current output, the current interest rate, and current private spending under each of the assumptions in (a) through (c). In each case, indicate what you think will happen to , and then how these changes affect output today.(a) The central bank will not change its policy.(b) The central bank will act to prevent any change in future output.(c) The central bank will act to prevent any change in the future interest rate.
