MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
10th Edition
ISBN: 9781319467203
Author: Mankiw
Publisher: MAC HIGHER
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Chapter 17, Problem 4QR
To determine
Impact of debt financed tax cut on different types of savings in the traditional view.
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MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
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- Do you think that conventional fiscal policy is different from islamic fiscal policy?arrow_forwardThe table sets out the data for an economy when the government's budget is balanced. The quantity of loanable funds demanded increases by $1.5 billion at each real interest rate and the quantity of loanable funds supplied increases by $0.5 billion at each interest rate If, at the same time the government budget becomes a deficit of $1.0 billion, what are the real interest rate and investment? Does any crowding out occur? >>> Answer to 1 decimal place The real interest rate is Investment is $ billion. There OA. is, HI percent a year crowding out in this situation because OB. is no the deficit increases the real interest rate, which decreases investment investment is $7.0 billion Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds demanded supplied (billions of 2007 dollars) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 5.0 5.5 6.0 6.5 7.0 7.5 8.0arrow_forwardA government surplus can decrease investment through the crowding-out effect because the surplus decreases the quantity supplied of loanable funds." Is this statement correct? Explain with words + graph(s)arrow_forward
- The Effects of Fiscal Deficits on an Economy.arrow_forwardThe table sets out the data for an economy when the government's budget is balanced. The quantity of loanable funds demanded increases by $1.5 billion at each real interest rate and the quantity of loanable funds supplied increases by $0.5 billion at each interest rate. If, at the same time the government budget becomes a deficit of $1.0 billion, what are the real interest rate and investment? Does any crowding out occur? >>> Answer to 1 decimal place. The real interest rate is C ... percent a year. Investment is $ billion. There crowding out in this situation because O A. is; OB. is no; the deficit increases the real interest rate, which decreases investment investment is $6.5 billion. Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds supplied demanded (billions of 2007 dollars) 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.5 5.0 5.5 6.0 6.5 7.0 7.5arrow_forwardHow can a country reduce its public debt? A) Increasing government spending B) Reducing budget deficits C) Expanding fiscal policy D) Increasing tax evasionarrow_forward
- Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing? fiscal policies monetary policies economic policies financial policiesarrow_forwarda) Why can't the government run a budget deficit in a one- period macroeconomic model? b) Why are government transfer payments not included in (expenditure-based) GDP?arrow_forwardAssume today is October 20, 2021. In which quarter of fiscal year 2022 is the federal budget?arrow_forward
- If taxes are reduced , will most people save more or less than before ? Does national saving rise or fall? Explain .arrow_forwardWhich of the following, regarding debt and growth, is false? a. If there is no (nominal) GDP growth, the debt/GDP ratio can only be reduced through fiscal surplus. b. Furman and Summers argue that the debt/GDP ratio is a misleading measure of a country's debt burden in an era of low interest rates. c. The burden of a dollar borrowed by the government today decreases over time—relative to GDP—if the interest rate on government debt is larger than the nominal economic growth rate. d. Blanchard and Leigh found that, following the Great Recession, countries that enacted fiscal austerity had less economic growth than they expected, and vice- versaarrow_forwardWhy might the level of government debt affect the government’s incentives regarding money creation?arrow_forward
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