Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Chapter 12, Problem 13CQ
To determine
Limitations of fiscal policy.
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If stability of the economy is the primary objective of Fiscal Policy, then an Annually Balanced Budget (Government Expenditures = Tax Revenues) is the best policy approach. True or False?
Evaluate the effectiveness of fiscal policy as a tool to reduce unemployment.
This course is designed to provide an understanding of market economies and the fluctuations they are subject to. With this in mind, please answer the questions that follow.
a) Assume the economy is in a recession. Discuss how the government could implement fiscal policy to deal with the recession and the steps by which fiscal policy moves the economy out of the recession (Explain fully).
b) Explain how expansionary fiscal policy in the U.S. would affect the economies of other countries.
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Economics: Private and Public Choice
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- 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.arrow_forwardSuppose we wanted to use fiscal policy (a change in taxes OR a change in government spending) in order to stimulate the economy. If we were concerned about the impact on the government’s budget deficit, which policy option should we choose? Explain your reasoning.arrow_forwardNo Plagiarism Please! Explain how implementation of fiscal policies and monetary policies can both be utilized to increase consumer and business spending and spur economic growth. Which of these policies will impact the federal budget and how?arrow_forward
- 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.arrow_forwardIf the government tries to reduce inflation when the production level in the country is higher than potential Gross Domestic Product, then one of the following answers which depicts a fiscal policy measure will be able to achieve that goal. Which one? Group of answer choices decrease in government spending decrease corporate tax rates decrease the interest rate increase transfer paymentsarrow_forwardBased on the Krugman text and your reader articles, what position do you take on the current fiscal policy debate of stimulus vs austerity? Be sure to include the current tight job markets, moderate-high inflation, and high-debt conditions in justifying your answer.arrow_forward
- In an attempt to reduce the large budget deficit, the government raised taxes and reduced government expenditure but unemployment soared and the budget deficit actually increased. A leading economist remarked: 'The time to attempt to reduce the deficit is when the economy is at overfull employment. Then policies designed to reduce the deficit will not only work but they will also achieve other desirable macroeconomic goals.' Do you agree with the economist? Why or why not?arrow_forwardHow is the Social Security system currently influencing the size of the budget deficit? If it is not re-formed, how will Social Security influence the budget deficit a decade from now? Is this a cause for concern? Why or why not?arrow_forwardDefine fiscal policy and explain the role of income taxes and government spending as fiscal policy tools.arrow_forward
- Was fiscal policy effective when the US economy was experiencing stagflation during the 1970s? Why or why not?arrow_forwardDiscuss in detail the role of fiscal policy in terms of stabilization under Classical and Keynesiansystems. Also, specify which tool is the most effective under each system.arrow_forwardThis course is designed to provide an understanding of market economies and the fluctuations they are subject to. With this in mind, please answer the questions that follow. a) Assume the economy is in a recession. Discuss how the government could implement fiscal policy to deal with the recession and the steps by which fiscal policy moves the economy out of the recession b) Why is the shape of the aggregate supply curve important in understanding the impact of monetary and fiscal policy?arrow_forward
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