Not use Ai and chatpt An economy has a budget surplus of $900, private savings of $2,000, and investment of$1,300.1. Write out the national savings and investment identity.2. What will be the balance of trade in this economy? Show your work!3. Suppose that the budget surplus change to a budget deficit of $900, with private savingand investment unchanged. What is the new balance trade in this economy? Does theeconomy run now a trade deficit or a trade surplus? Show your work!

1. The national savings and investment identity can be written as:National Saving (S) = Private…

Answered: An economy has a budget surplus of…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter31: The Impacts Of Government Borrowing

Section: Chapter Questions

Problem 2SCQ: Assume an economy has a budget surplus of 1,000, private savings of 4,000, and investment of 5,000....

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Explain how a shift from a government budget deficit to a budget surplus might affect the exchange rate.
Assume an economy has a budget surplus of 1,000, private savings of 4,000, and investment of 5,000. Write out a national saving and investment identity for this economy. What will be the balance of trade in this economy? If the budget surplus changes to a budget deficit of 1000k with private saving and investment unchanged, what Is the new balance of trade In this economy?
For each of the following, indicate which type of government spending would justify a budget deficit and which would not. Increased federal spending on Medicare Increased spending on education Increased spending on the space program Increased spending on airports and air traffic control
Under what conditions will a larger budget deficit cause a trade deficit?
If imports exceed exports, is it a trade deficit or a trade surplus? What about if exports exceed imports?
Imagine an economy in which Ricardian equivalence holds. This economy has a budget deficit of 50, a trade deficit of 20, private savings of 130, and investment of 100. If the budget deficit rises to 70, how are the other terms in the national saving and investment identity affected?
Describe how a plan for reducing the government deficit might affect a college student, a young professional, and a middle-income family.
When is a trade deficit likely to work out well for an economy? When is it likely to work out poorly?
Sketch a diagram of how a budget deficit causes a trade deficit. (Hint: Begin with what will happen to the exchange rate when foreigners demand more U.S. government debt.)
1. How could a greater fiscal deficit create a greater trade deficit? 2. What would you do to reduce the deficit? 3. What is the opportunity cost of government spending on servicing the interest on the debt. 4. If the federal government wished to reduce the deficit to any significant degree without raising taxes, where would the reduced spending likely to have to come from? 5. Assume the federal government replaces the federal income tax with a sales tax placed on consumption expenditures. Analyze the impact of this tax change on taxation efficiency and equity.
Question 5 What is meant by "a tariff on imports?" Summarize the domestic effect of a tariff on the price of imported goods? Question 6 What is meant by discretionary fiscal policy? Give an example of how the government can use fiscal policy to stimulate consumer spending. (You must use the terms disposable income and demand). Question 7 What is meant by economic growth and why is it one of the most important goals macroeconomists seek to achieve? In your explanation, show the relationship between production, consumption, and investment in periods of economic growth? Question 8 What is meant by the "National Debt?" Explain why the "National Debt" has been both a"benefit and a burden". Give one example showing a benefit and one example that shows the "National Debt" is a burden.
The diagram below shows two budget deficit functions for a hypothetical economy. Budget Deficit (millions of dollars) 14 7.5 4 Real GDP (millions of dollars) 100 200 300 400 500 600 700 Budget Surplus (millions of dollars) Bo B1 FIGURE 31-2 FIGURE 31-2 Refer to Figure 31-2. Initially, suppose real GDP is $100 million and the budget deficit is $14 million, as shown by point A. Which of following vents coul result in a move from point A to point C? A) a fiscal contraction and a decrease in GDP B) a fiscal expansion and an increase in GDP C) a fiscal expansion and a decrease in GDP an increase in GDP with no change in fiscal policy E) a fiscal contraction and an increase in GDP

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