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 31, Problem 2.6P
To determine
The role of budget deficit in the growth rate of the economy.
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Chapter 31 Solutions
Principles of Economics (12th Edition)
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Similar questions
- 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_forwardIf you were the Prime Minister of Malaysia, what would you do to reduce the fiscal deficit of the country? Explain in detail.arrow_forwardPlease answer the questions related to the national budget deficit in the United States. Which of the reasons given is often cited as a benefit of running a budget deficit? operating with a budget deficit lesses the impact of a recession budget deficits reduce tax costs for American workers working under deficit conditions helps to smooth out tax rates over time running a deficit helps to increase spending for public assistance programsarrow_forward
- If tax cuts don't cause enough economic growth, we might also need to reduce expenditures to reduce the deficit. Explain?arrow_forwardConventional ways to reduce the deficit and the related problems. Unconventional ways to reduce the deficit and the related problems. Please explain these as soon as possible pleasearrow_forwardWhich statement best explains why budget deficits may bring on a recession? a) Large deficits increase interest rates, attracting foreign investors. b) Persistent deficits lead to economic problems that scare away foreign investors. c) Spiraling national debt depresses private saving, reducing the amount of capital that can be invested. d) Deficit spending leads to a reduction in aggregate demand and a decrease in output.arrow_forward
- During the Great Recession there was a large drop in the US trade deficit. There was also a large increase in the US government budget deficit. Are these two facts related? What else must be going on to have a falling trade deficit and a growing government budget deficit at the same time?arrow_forwardWhich of the below statements is INCORRECT about budget deficits and surpluses? Group of answer choices An economy should steer clear of deficit budgets even during economic recessions. If an economy slips into a recession, tax revenues will fall, but raising taxes will certainly worsen the situation. A budget deficit is funded by borrowing money by selling treasury bonds, which requires the government to pay back the interest on the amount borrowed, plus the principal borrowed. Since 2001 the U.S. has been consistently spending more than the tax revenue is collected, and the amount borrowed plus interest owed has been accumulating to a rather large national debt. A budget deficit occurs when the government spends more than it collects in tax revenues.arrow_forwardHow 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_forward
- Is economy in a better shape today than it was when the article was written? Refer to inflation, unemployment, the business cycle, GDP growth, the federal deficit, and the trade deficit. Answer this question after reading the article.arrow_forwardWhat is considered "too much" debt or "too large" a deficit? Are you able to provide any guidelines for deficit or debt ceilings?arrow_forwardThe effects of a budget deficit can be offset by: a. External financing b. Crowding out c. A structural deficit d. All of the above Crowding out occurs when: a. Business investment increases due to lower interest rates b. There is an increase in business borrowing c. An increase in federal borrowing reduces private borrowing d. There is an increase in the nations’ savings If the government wanted to reduce inflation in the economy, it could: a. Increase income transfers b. Increase government spending c. Cut taxes d. Increase taxesarrow_forward
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