Suppose that Trumponomics-the economic policy of new President of the United States, Donald Trump-seems likely to involve cutting taxes and increasing government spending.
(a) Illustrate what you think the effects of such a policy are likely to be on price and potential output in the long run using an AD-AS model in. [No discussion needed. Illustrate your diagram clearly.]
(b) Discuss how the nature of the changes you illustrate in (a) will depend upon exactly what kind of tax cuts and spending increases are implemented. [Instructions: Maximum 150 words. You must enter the word count of your answer.]