President Biden recently boasted of his administration’s success in lowering the deficit of the US government. This reduction could be considered “budget austerity”. Budget austerity usually involves a reduction in federal government spending and/or the raising of taxes to keep the budget deficit under control. Assume that just as austerity was beginning that we found the economy at a level of Ye that was below full employment (Ye < YN), as we did in the first two quarters of 2022. Illustrate graphically using the simple expenditure model developed in class what austerity will mean when for the level of planned spending when we start at Ye<YN, in theory, for the level of planned spending and equilibrium output as it takes effect. Lastly, given the movement you show in planned spending, if any, does the policy of austerity make sense if your goal is use policy to achieve YN? Explain.

Austerity measures imply government policies that are objective to reducing public sector debt.…

Answered: President Biden recently boasted of his…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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President Biden recently boasted of his administration’s success in lowering the deficit of the US government. This reduction could be considered “budget austerity”. Budget austerity usually involves a reduction in federal government spending and/or the raising of taxes to keep the budget deficit under control. Assume that just as austerity was beginning that we found the economy at a level of Y_e that was below full employment (Y_e < Y_N), as we did in the first two quarters of 2022. Illustrate graphically using the simple expenditure model developed in class what austerity will mean when for the level of planned spending when we start at Y_e<Y_N, in theory, for the level of planned spending and equilibrium output as it takes effect. Lastly, given the movement you show in planned spending, if any, does the policy of austerity make sense if your goal is use policy to achieve Y_N? Explain.

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