In 2010 the Greek government had to inform the European Commission on how it would control its budget deficit and improve the performance of its economy. The government’s debt is so high that agencies assessing the creditworthiness of the government downgraded it (which would mean more interest has to be paid to raise finance). Proposals were likely to include a 10% cut in government spending. Questions What actions can the government take to increase national income growth in Greece? If the Greek economy is in recession what would you expect to be the effect on: a) Inflation? b) Unemployment? c) Imports? Explain your answers.

In 2010 the Greek government had to inform the European Commission on how it would control its budget deficit and improve the performance of its economy. The government’s debt is so high that agencies assessing the creditworthiness of the government downgraded it (which would mean more interest has to be paid to raise finance). Proposals were likely to include a 10% cut in government spending. Questions What actions can the government take to increase national income growth in Greece? If the Greek economy is in recession what would you expect to be the effect on: a) Inflation? b) Unemployment? c) Imports? Explain your answers.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter31: The Impacts Of Government Borrowing

Section: Chapter Questions

Problem 17CTQ: Explain how decreased domestic investments that occur due to a budget deficit will affect future...

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