Government Spending, Taxes, and Fiscal Policy-End of Chapter ProblemThe president has just signed a new budget that drastically cuts taxes without decreasing government spending. Whenasked how he plans to address the dramatic increase in deficits that will occur due to the tax cuts, the president responds,"We're going to see some amazing economic growth because of this new policy, so much growth that we're going to growour way out of any short-term increases to government debt."If this extra economic growth doesn't materialize, what are some of the risks to the U.S. economy?Interest payments on the federal debt will consume a larger portion of the federal budget, potentially displacing othergovernment priorities.Higher government debt may make future borrowing more difficult.It gives foreign creditors substantial control over U.S. economic policy.It places an unsupportable burden on future generations.

Fiscal policy refers to the set of policies that the government uses to control the fluctuations in…

The president has just signed a new budget that drastically cuts taxes without decreasing government asked how he plans to address the dramatic increase in deficits that will occur "We're going to see some amazing economic growth because our way out of any short-term increases to government debt." of this new policy, due spending. When to the tax cuts, responds, so much growth that we're going to grow. the president

The president has just signed a new budget that drastically cuts taxes without decreasing government asked how he plans to address the dramatic increase in deficits that will occur "We're going to see some amazing economic growth because our way out of any short-term increases to government debt." of this new policy, due spending. When to the tax cuts, responds, so much growth that we're going to grow. the president

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter12: Federal Budgets And Public Policy

Section: Chapter Questions

Problem 3.8P

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Similar questions

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