Question 4. Suppose a government moves to reduce a budget deficit.a. Using the long-run model of the economy developed in Chapter 3, graphicallyillustrate the effect of reducing a government's budget deficit by reducing governmentpurchases. Be sure to label:i. the axesii. the curvesiii. the initial equilibrium valuesiv. the direction curves shiftv. the terminal equilibrium values.b. State and explain in words what happens to the following variables:i. the real interest rateii. national savingiii. investmentiv. consumptionv. output.

When expenditures of government exceed the government revenue then a budget deficit occurs. The…

Answered: Question 4. Suppose a government moves…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In a recession, C + I + G will all decline. This shifts aggregate demand inwards, off society’s PPF. Perhaps supply is too much and deflation occurs. So, company’s cut costs and C + I + G declines again. Besides fiscal stimulus or giving people money (grow the C & the G), what is another way to stimulate C or I? Put another way, how can government stoke the animal spirits without stimulus?
Answer the following questions: As you know, the US government has been running budget deficits for several years now. In your opinion, and based on economic reasoning, what will happen to the US economy if the US Federal Government continues to run annual budget deficits for the next decade. Will the economy survive that? Will the economy grow? Will it grow as fast as it could? Will the deficits cause the economy to grow faster? Will it grow at all? These are some of the questions you might address in your primary post.
In which of the following cases does the size of the government’s debt and deficit indicate potential problems for the economy? Explain your answer. a) The government’s debt is relatively low, but the government is running a large budget deficit as it builds a high-speed rail system to connect the major cities of the nation. b) The government’s debt is relatively high due to a recently ended deficit-financed war, but the government is now running only a small budget deficit. c) The government’s debt is relatively low, but the government is running a budget deficit to finance the interest payments on the debt. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
In the long-run framework, budget surpluses: Choose the Correct and Explain why its correct should be run whenever output dips below potential output. should never be run since they crowd out investment in the short run. are better than budget deficits over the long run because unlike budget deficits, they increase saving and investment. should be run on a permanent basis since they boost saving and investment and stimulate economic growth.
QUESTION 5 05. The "crowding-out secondary effect expansionary macroeconomic policy a) For fiscal policy it is about government borrowing to finance the government budget deficit, associated with expansionary fiscal policy. This increased government borrowing tends to increase the market rate of interest, which dampens investment spending. b) For monetary policy it is about the expansion of the economy increasing the demand for money to service the increased volume of transactions. This tends to increase the market rate of interest, which dampens investment spending. c) Decreases the autonomous spending multiplier and thus the impact of expansionary policy. d) All of the above.
Which pairs of operations BEST fit with fiscal policy? A.) Discount rate and Government Spending B.) Open Market Operations and Discount Rate C.) Taxation and Open Market Operations D.) Government Spending and Taxation
A government is issuing treasury bonds to finance its budget deficit. In Financial Economics, this action represents:A) A method to decrease the national debtB) A way to finance government spending without creating debtC) A means of raising public funds by incurring government debtD) A strategy to redistribute wealth without incurring debt
This week's City Council Scenario: The Federal Government is developing a plan to help the nation's economy. There are some calling for Expansionary Fiscal Policies while others are in favor of Expansionary Monetary Policies. Prepare a response to help the townspeople understand the plans being presented at the Federal Level. Contrast Expansionary Fiscal policies and Expansionary Monetary policies. Explain the effect of Fiscal and Monetary policies on the economy. Discuss the drawbacks of not using any policies to help the economy.
The economy is at full employment, but the government is disappointed with the growth rate of real GDP. It wants to increase real GDP growth by stimulating investment. At the same time, it wants to avoid an increase in the price level. a.Suggest a combination of fiscal and monetary policies that will achieve the government’s objective. b.Which policy would you recommend that the government adopt? c. Explain the mechanisms at work under your recommended policy. d.What is the effect of your recommended policy on the composition of aggregate demand? eWhat are the short-run and long-run effects of your recommended policy on real GDP and the price level?
1. combine the budget constraints of the consumer and government to demonstrate that the timing of taxes doesn't affect the timing of consumption in the two-period model, thus establishing that the Ricardian equivalence theorem holds. • Specifically: Report down and label the consumer's budget constraint and the government's budget constraint in the current and future period and then combine them, showing your work by labelling this step. When you have arrived at a point where you can show that Ricardian equivalence holds circle your answer and write a (at most) brief description of how to interpret your result. 2.Relate the permanent income hypothesis to the Ricardian equivalence theorem.
Let's examine the role of taxes in the Solow-Swan model. Imagine that the behavior of an economy may be summarized by the following three equations: K++1 = It + (1 – 8) K. I = s (1 – T) Y Y; = K¢ (A,Lt)'-a Assume that population grows at rate n and technology at rate g, so that Lt+1/Lt = N++1/N = 1+ n and A+1/A = 1+ g, respectively. Income in this economy is taxed with rate T and the tax revenues are used for government consumption which is useless from the point of view of households. (a). Transform the three equations into per effective labor form, i.e. divide them by A, L,. Make use of notational convention = X¢/ (A¿L¿). (b). Find the balanced growth path level of capital per effective labor k* in this economy. 1 (c). Discuss the effects of changes in parameters 8, n, g, s, T on the economy's balanced growth path level of capital per effective labor k*. (d). Discuss the effects of changes in parameters 8, n, g, s, T on the economy's balanced growth path level of consumption per…
Imagine that a group of advisors to the president has suggested providing a tax cut for the middle class in order to stimulate the economy and reduce unemployment. The president has asked for your analysis of this proposed tax cut. Post your thoughts both as an economic scientist and economic policy advisor. Read the scenario and, respond to the following: Describe how an economic scientist would approach the tax cut recommended by the advisors in the scenario you just read. What are some economic factors that the economic scientist would consider when crafting his or her statement on the tax cut proposed? Describe how an economic policy advisor would approach the same tax cut and provide the reasoning behind the position. Remember to think like an economist scientist and economic policy advisor when you write your post, even if it goes against your own opinions about whether a tax cut is a good idea. To guide your responses, consider the following questions: What economic…

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