Describe in one sentence what Ricardian equivalence implies for the government budget and the current account. In another sentence, describe to what extent the equivalence holds in practice.
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Describe in one sentence what Ricardian equivalence implies for the government budget and the current account. In another sentence, describe to what extent the equivalence holds in practice.
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- With COVID-19, many economies suffered from severe recession. To save their economies, a mix of monetary and fiscal policies was used in 2020. Explain how monetary policy and fiscal policy could be used to stimulate an economy under a recession. State their limitations under the COVID-19.If an economy has current account and budget deficits, the government should tighten fiscal policy. State whether this statement is True, False or Uncertain. Explain why using the Balance of Trade or Balance of Payments curve and use the accounting framework. What does current account refer to here exactly? What does a budget deficit mean in technical terms. Give equations for both. Also draw a diagram to illustrate necessary fiscal policy implications."Explain how and when fiscal and monetary policy should be used in a market-based system to accommodate economic growth; that is, discuss the most efficacious use of expansionary and contractionary fiscal and monetary policy. a complete analysis with supplemental graphs."
- Explain how economic populist policies usually lead to overvalued exchange rates and large trade deficits.A central bank whose sole purpose is to stabilize price growth will never cooperate with an expansionist fiscal policy. Starting at equilibrium and in the context of the national income identity, a sudden increase in private investment holding the government budget deficit fixed implies a trade surplus. Consider an economy that is open to international trade and in which the domestic real interest rate matches the average world interest rate. In the context of the loanable funds market if there are no restrictions on capital movements across borders, an increase in taxes while government spending remains fixed will lead to an appreciation of the real exchange rate."Explain how and when fiscal and monetary policy should be used in a market-based system to accommodate economic growth; that is, discuss the most efficacious use of expansionary and contractionary fiscal and monetary policy. Make sure to discuss all relevant markets, and to give a complete analysis with supplemental graphs."
- Explain the expansionary fiscal policy in the short run and long run (ignoring exchange rate and capital flows).Examine the consequences for a hypothetical developing economy if the rate of borrowing to fund a fiscal deficit is growing annually at a faster rate than the GDP. Include a graphical analyses using the below hypothetical numbers and percentages. GDP = R1000 Fiscal Deficit = R1200 GDP is used to settle / pay for fiscal deficits. Therefore R1000 - R1200 = R200. This implies that the deficit keeps on growing. Remember the GDP equation and the impact of imports and exports.Using the South African SoNA 2020 as a reference, discuss examples of the different ways that the SouthAfrican government intervenes in the economy.
- The notation is Y = GNP = national income C = consumption 1 = private investment G = government spending X = exports M = imports T = taxes S = savings There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures. This relationship is given by BCA = X - M = (SI) + (TG). Given this, in order for a country to reduce a BCA deficit, which of the following must occur?An open economy is described by the following system of macroeconomic equations, in which all macroeconomic aggregate are measured in billions of Namibian dollars, N$: Y=C+I+G+X-M. C=100+0.75Yd. T=50+0.5y. I=200. X=200. M=50+0.25y. G=150. (a) Determine the equilibrium level of income/output.Using the information below for the open economy model,a) Solve the equilibrium output step-by-step.b) Solve the trade balance step-by-step.c) Solve the fiscal balance step-by-step.Autonomous consumption → CA= 110Marginal propensity to consume → cY = 0.5Lump-sum tax collection → T = 50Income tax rate → t = 0.2Investment expenditure → I = 100Government expenditure → G = 100Exports → X = 100Marginal propensity to import → m = 0.3