President Ford’s Theory. During the 1970s, President Gerald Ford proposed that taxes be decreased but that, to avoid increasing the government budget deficit, government spending should be decreased...

President Ford’s Theory. During the 1970s, President Gerald Ford proposed that taxes be decreased but that, to avoid increasing the government budget deficit, government spending should be decreased by the same amount.

a. What happens to GDP if taxes and government spending are both decreased by the same amount?

b. Should President Ford have been worried about his tax-reduction plan? Why or why not?