Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 27, Problem 1DQ
a)
To determine
The effects of a larger budget deficit on the level of
a)
Expert Solution
Explanation of Solution
Suppose the government increases its spending and keeps the same tax, then it will lead to a large budget deficit. On the other hand, an increase in public spending without changing the tax rate would increase the level of GDP in the United States.
b)
To determine
The effect of a higher government spending that leads to less spending elsewhere.
b)
Expert Solution
Explanation of Solution
If government spending is switched from some purchases toward other purchases, then the total government spending will not change. If there is no change in government spending, then the GDP will not be affected.
c)
To determine
The effect of a higher government spending that lead
c)
Expert Solution
Explanation of Solution
A continuous increase in public spending without increasing taxes would lead to a larger budget deficit. As a result, GDP would increase, and even if taxes are increased that equal the increase in government spending by an amount less than that the increase in taxes and spending, GDP will rise anyway.
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Students have asked these similar questions
The idea that a country can experience gains from trade means that it can
A) consume at a point outside its production possibilities frontier.
B) increase its exports.
C) increase the efficiency of its production.
D) experience a bowed-out production possibilities frontier.
A country is likely to have a comparative advantage in a land-intensive activity if it has a
A) alot of land relative to its population.
B) large population relative to its landmass.
C) higher opportunity cost of producing technology.
D) large amount of capital equipment relative to its population.
Florin and Guilder are two countries separated by a narrow sea. They use currencies called, respectively, the Flop and the Gulp.
Suppose the nominal exchange rate is 20 Flops per Gulp.
A Guilderian trader buys a 120 Flop barrel of Florish pickles by exchanging 6 Gulps, and a Florish trader buys a 4 Gulp crate of Guilderian apples by exchanging 80 Flops.
Then the Gulp depreciates to 10 Flops per Gulp.
Instructions: Enter your answers as whole numbers.
How much must the Guilderian pay for the same 120 Flop barrel of pickles?
Gulps
How much must the Florish trader pay for the same 4 Gulp crate of apples?
Flops
Chapter 27 Solutions
Economics: Principles & Policy
Knowledge Booster
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