Answered>Order 303

Ok, in an example of economic growth let’s say that a government attempts to adjust the amount of government spending to stop inflation/stabilize the price level. Showing the desired effect on the price level, how would ‘G’ be adjusted on a graph? Also, by how much and in which direction should taxes be adjusted, if the government adjusts taxes in order to prevent any crowding in? What is the final effect of this combination of policies on the price level and real output, and long-run economic growth/ potential GDP?

What is “crowding in”/how does it look like on the graph?