Understanding Japanese Fiscal Policy. Japan’s Finance Ministry agreed to income tax cuts to combat a decade-long recession in the 1990s—but only if national sales taxes were increased several years...

Understanding Japanese Fiscal Policy. Japan’s Finance Ministry agreed to income tax cuts to combat a decade-long recession in the 1990s—but only if national sales taxes were increased several years later. a. What would you expect to be the short-run effect of the income tax cuts? Draw a graph to show this effect.

b. What would you expect to be the long-run effect of the income tax cuts? Draw a graph to show this effect.

c. Why did the Finance Ministry require an increase in sales taxes several years later?

d. What was the Finance Ministry trying to prevent?