Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 29, Problem 3.5P
To determine
changes in budget deficit on the basis of government spending and tax policy.
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Students have asked these similar questions
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.
What effect did the economic program have on the federal deficit?
Look into the current level of the national debt and the federal deficit in the U.S. Pick any government program and research how much the U.S. spends on it. Does the amount surprise you? What might happen if the budget for the program were increased or reduced? Should the current deficit and debt be cut down? What would be some pros and cons of reducing them?
Chapter 29 Solutions
Principles of Economics (12th Edition)
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Similar questions
- Explain how a budget deficit arises and what actions governments must take in this circumstance. How does the budget deficit relate to the national debt?arrow_forwardBudget deficit is defined as the difference between government spending and tax revenues. As President Clinton once stated, dealing with the budget deficit is simple "arithmetic". We need to cut government spending and increase tax revenues to lower the deficit. 1. If you are one of the policy makers determined to control the federal budget, which federal spending item(s) would you cut? 2. How would you change the tax policy to increase the tax revenue? Would you increase the income tax rate or decrease it to increase revenue (review the Laffer curve and comment on the relationship between the tax rate and and tax revenue)? How would you change the payroll tax? Who should have the burden of tax? Please review the 2018 Trump tax law and Biden administrations tax proposals. Below are two short videos: One supports the tax cuts, the other opposes. Tax cuts will spark growth and employment (Laffer) Six things we'll regret about Trump tax cuts 3. What is the impact of Covid-19 on the budget…arrow_forwardHow can a budget deficit be reduced? Group of answer choices Decreasing government spending and/or increasing taxes Lowering taxes and raising government spending By only increasing taxes Increasing government spending and/or decreasing taxesarrow_forward
- The U.S. government's debt is currently about $20 trillion, which is 105% of GDP. How much debt is too much debt for our country?arrow_forwardGovernment expenditures and the assessment of taxes is an issue that goes back to the origins of the United States. Why do legislators and other politicians choose to spend so much money? What is the federal deficit and how is it different from the national debt? What has happened recently to federal deficits and the national debt, and what are some risks associated with persistently high deficits and a large national debt?arrow_forwardThe federal government ran a budget surplus in the late 1990 and in the year 2000, but has since returned to running a budget deficit. Explain why reducing the budget deficit can cause short-term pain in the form of lower employment, higher unemployment, and a recession. (Use diagram and analysis)arrow_forward
- 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_forwardHow fiscal policy works, and its benefits.arrow_forwardDefine the budget deficit.arrow_forward
- No 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_forwardAs long as tax rates are not very high, a decrease in tax rates will tend to a. increase the budget deficit b. decrease the budget deficit c. leave the budget deficit unchanged d. cause the budget deficit to first decrease then increasearrow_forwardAny deficit that a government might run must be financed somehow. Which of the following is a vehicle by which a government might finance spending beyond its means? a. Turning over existing debt with advantageously lower interest rates b. Floating new bonds c. Purchasing existing bonds d. Calling in foreign debtarrow_forward
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