Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 31, Problem 16CTQ
Assume there is no discretionary increase in government spending. Explain how an improving economy will affect the budget balance and, in turn, investment and the trade balance.
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Assume there is no discretionary increase in government spending. Explain how an improving economy will affect the budget balance and, in turn, investment and the trade balance.
Consider the economy of Canada. Its households spend 55% of increases in
their income and saves 45 %. There are no taxes and no foreign trade.
Currently, Canada has a recessionary gap, the governments aim is to get
actual output to increase by 220 billion dollars. How much of a tax cut do
they need to have to achieve the overall increase in output of 220 billion
dollars?
At which point would the government be most likely to try to stimulate the economy
Chapter 31 Solutions
Principles of Economics 2e
Ch. 31 - In a country, private savings equals 600, the...Ch. 31 - Assume an economy has a budget surplus of 1,000,...Ch. 31 - In the late 1990s, the U.S. government moved from...Ch. 31 - Imagine an economy in which Ricardian equivalence...Ch. 31 - Why have many education experts recently placed an...Ch. 31 - What are some steps the government can take to...Ch. 31 - Based on the national saving and investment...Ch. 31 - How would you expect larger budget deficits to...Ch. 31 - Under what conditions will a larger budget deficit...Ch. 31 - What is the theory of Ricardian equivalence?
Ch. 31 - What does the concept of rationality have to do...Ch. 31 - What are some of the ways fiscal policy might...Ch. 31 - What are some fiscal policies for improving a...Ch. 31 - What are some fiscal policies for improving the...Ch. 31 - Explain how cuts in funding for programs such as...Ch. 31 - Assume there is no discretionary increase in...Ch. 31 - Explain how decreased domestic investments that...Ch. 31 - The U.S. government has shut down a number of...Ch. 31 - Explain how a shift from a government budget...Ch. 31 - Describe how a plan for reducing the government...Ch. 31 - Explain whether or not you agree with the premise...Ch. 31 - Explain why the government might prefer to provide...Ch. 31 - Under what condition would crowding out not...Ch. 31 - What must take place for the government to run...Ch. 31 - Sketch a diagram of how a budget deficit causes a...Ch. 31 - Sketch a diagram of how sustained budget deficits...Ch. 31 - Assume that the newly independent government of...Ch. 31 - Illustrate the concept of Ricardian equivalence...Ch. 31 - During the most recent recession, some economists...
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Similar questions
- a) 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_forwardIf taxes are increased, will most people save more or less than before? Does national saving rise or fall? Explain.arrow_forwardWhat is The Effect of a Government Budget Deficit on Investment?arrow_forward
- Government is considering a policy change to stimulate the economy by encouraging private consumption by reducing sales taxes. The loss of tax revenue will be made up by increasing taxes on corporate profits and excess savings. What are the short- and long-term effects of such a change?arrow_forwardHow do you recommend the government change GDP and taxes to stabilize the economy in each of the following scenarios? Economic growth has started slowing and the unemployment rate has increased over the past four months. There has been strong growth in GDP over the past year, unemployment is very low, and inflation has started to rise. Prices are stable, unemployment is low and the economy is growing at an average rate.arrow_forwardfill in the blank The two types of national policies that influence the national economy are_________ policy and ________ policy.arrow_forward
- Assume a country would like to increase investment by limiting consumption. What would be the point of a policy like that? What would be the impact on the economy? Who would benefit? Who would lose out?arrow_forwardIf government spending is permanently increased, consumption and investment would fail? True or Falsearrow_forward"An economy is dynamically inefficient if its citizens are short - sighted and save too little. Savings should be stimulated by the policy maker in a dynamically inefficient economy." Explain and evaluate these propositions.arrow_forward
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