Macroeconomics 2nd Edition by Campbell McConnell ,Stanley Brue,Sean Flynn

Exercise 16

Use Figure 8.4 to explain why the deliberate increase of the cyclically adjusted budget deficit (resulting from the tax cut) will reduce the size of the actual budget deficit if the fiscal policy succeeds in pushing the economy to its full-employment output of GDP 1. In requesting a tax cut in the early 1960s, President Kennedy said, "It is a paradoxical cut tax rates now." Relate this quotation to your previous answer in this question.