Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + LMS Integrated Aplia, 1 term Printed Access Card
7th Edition
ISBN: 9781305242500
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 23, Problem 6PA
To determine
Budget deficit and future taxes.
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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.
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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.
If you were the Prime Minister of Malaysia, what would you do to reduce the fiscal deficit of the country? Explain in detail.
Chapter 23 Solutions
Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + LMS Integrated Aplia, 1 term Printed Access Card
Ch. 23.1 - Prob. 1QQCh. 23.2 - Prob. 2QQCh. 23.3 - Prob. 3QQCh. 23.4 - Prob. 4QQCh. 23.5 - Prob. 5QQCh. 23.6 - Prob. 6QQCh. 23 - Prob. 1QRCh. 23 - Prob. 2QRCh. 23 - Prob. 3QRCh. 23 - Prob. 4QR
Ch. 23 - Prob. 5QRCh. 23 - Prob. 6QRCh. 23 - Prob. 7QRCh. 23 - Prob. 8QRCh. 23 - Prob. 9QRCh. 23 - Prob. 10QRCh. 23 - Prob. 1QCMCCh. 23 - Prob. 2QCMCCh. 23 - Prob. 3QCMCCh. 23 - Prob. 4QCMCCh. 23 - Prob. 5QCMCCh. 23 - Prob. 6QCMCCh. 23 - Prob. 1PACh. 23 - Prob. 2PACh. 23 - Prob. 3PACh. 23 - Prob. 4PACh. 23 - Prob. 5PACh. 23 - Prob. 6PACh. 23 - Prob. 7PACh. 23 - Prob. 8PA
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- Congress recently passed and President Biden signed the American Rescue Plan (ARP), which will add $1.9 trillion to the federal deficit over the next ten years. Even before this new spending, federal debt held by the public was slated to reach 107% of GDP by 2031, the highest in history. What do high deficits mean going forward?arrow_forwardhow could our government help solve the budget crisis? What changes could/should be made to spending and what changes could/should be made to taxes? How would these changes impact our economy? How would these changes impact people?arrow_forwardThe Effects of Fiscal Deficits on an Economy.arrow_forward
- Suppose 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_forwardWhat budget changes would have to occur in order to lower an annual deficit? Annual expenditures would have to rise. Annual expenditures would have to decline and annual tax collections would have to rise. Annual tax collections would have to fall. Annual expenditures would have to rise and annual tax collections would have to fall.arrow_forwardHow can a government that isn't running a deficit still get itself into financial trouble?arrow_forward
- For the last 50 years or so, republicans and democrats at the national level have each favored policies that have led to increased budget deficits, but the policies are different. Republicans have favored tax cuts, while democrats have favored increases in government spending. Perform TWO composition of output analyses, one that examines the impact of a tax cut and one that examines the impact of an increase in government spending. Then, write a sentence or two that describes how the impacts of the two are the same and how they are differentarrow_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_forwardWhen the economy is in recession, government revenue falls due to a falling tax base. Therefore the proper role of government should be to increase taxes and cut spending so as to balance the Federal budget. Do you agree? Why?arrow_forward
- How does the federal government finance a budget deficit? It prints more money. It purchases U.S. Treasury bonds. It cuts spending on entitlement programs. It borrows funds by selling Treasury bonds.arrow_forwardDuring difficult economic times, why are uniform across-the-board budget cuts poor fiscal policy?arrow_forwardDuring the 1990s, the federal budget moved from a deficit to a surplus. What factors accounted for this change? Were the budget surpluses of the late 1990s good for the economy? Would it have been better to have reduced taxes and balanced the budget during 1999-2000? Why or why not?arrow_forward
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