If Ricardian equivalence is true, and the government raises taxes (holding spending constant), how does the average person’s behavior change? In other words, how does he or she react to a tax increase?

Please answer the question below: If the current real GDP is P700 billion, which of the following policies would bring the economy to potential output? a. increase government spending by P25 billion b. increase government spending by P100 billion c. increase government spending by P20 billion d. decrease government spending by P100 billion   If current real GDP is P700 billion, which of the following policies would bring the economy to potential output? a. decrease taxes by P100 billion b. increase taxes by P100 billion c. decrease taxes by P25 billion d. increase taxes by P25 billion * the attached photo is just connected to the question *

A fiscal stimulus was initiated by President Obama in response to the economic downturn of 2008-2009. At that time, the president's economists estimated the multiplier to be a. 2.4 for government purchases and 1.4 for tax cuts. b. 3.2 for government purchases and 2.0 for tax cuts. c. 1.6 for government purchases and 0.4 for tax cuts. d. 1.6 for government purchases and 1.0 for tax cuts.

In Hofstralia, initially nobody is defaulting on their loan, and the government is running a balanced budget in every period. Joe is a borrower. Draw Joe’s intertemporal budget constraint, use an indifference curve to show his optimal consumption bundle, and place an endowment point (and show its coordinates) on his budget constraint consistent with the fact that he is a borrower. Suppose that the government is eliminates taxes in the current period, and finances its spending through a deficit. Show graphically how the tax cut would affect Joe’s borrowing, and explain what would happen to his consumption and welfare. Would the Ricardian equivalence hold? Why or why not? Suppose now that due to a recession people start losing their jobs. Banks expect some borrowers to default but because of asymmetric information, they do not know which ones. Explain how interest rate on loans would change and why. Show on the graph and explain how events in the financial market would affect Joe’s…

Ricardian equivalence: Suppose that the government fears the economy mightbe heading into a recession and decides to cut income taxes today in an efortto prevent the recession.

In the classical budgeting era from WWII to the early 70s, most citizens agreed on public policy and where to spend tax dollars? True or False

Outline the supply-side view of fiscal policy. How does this view differ from the various demand-side theories? Would a supply-side economist be more likely to favor a $500 tax credit or an equivalent reduction in marginal tax rates? Why?

Why does the budget require a forecast of the economy? Under what circumstances would actual government spending and tax revenue fail to match the budget as approved? kindly explain answers in a simpler way.

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