ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose that you are a member of the Council of Economic Advisers. The president has asked you to prepare a statement on the question, "What is the proper fiscal policy for the next 12 months?" Pre-pare such a statement, indicating (a) the current state of the economy (that is, the
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- How and why would joint budget resolutions be effective at influencing budget reforms and reducing deficits?arrow_forwardThe imaginary country of Acordia lists the following projected revenues and outlays for 2020: $30 million in personal income tax, $20 million in corporate income tax, $7 million in indirect taxes, $2 million in investment income, $35 million in transfer payments, $14 million in government expenditures, and $4 million in debt interest. What is the projected budget surplus (or deficit) for 2021? Calculate the amount and indicate whether it is a surplus or deficit.arrow_forwardSome Economists argue that Fiscal policy have no effects in the long run on employment and aggregate output in the economy. What are the arguments behind this belief? EXplain. If indeed the government has to apply the expansionary fiscal policy what would eventually happen to the economy. Explain step by step the process impacting the economy.arrow_forward
- What are the primary goals of expansionary and contractionary fiscal policies and their effects on unemployment rates, inflation rates, interest rates, private investment, and GDP?arrow_forwardHow would a tax cut impact the National Budget and the National Debt? What are the pros and cons of running a deficit? Would you support such a tax cut and for whom should we impose the tax cut?arrow_forwardIf Investment = f(r*) a. Explain with pictures how it affects the balance of Supply/Saving and Investment Demand in the event of Fiscal policy, namely by decreasing state spending and increasing taxes. b. Explain with pictures how it affects the balance of Supply/Saving and Investment Demand in the event of Fiscal policy, namely by decreasing state spending and increasing taxes if it happens overseasarrow_forward
- The economy is experiencing negative GDP growth and high unemployment. Which fiscal policy action should the government implement in an attempt to fix this problem? A.) increase spending B.) raise taxes C.) increase the reserve requirement D.) decrease interest ratesarrow_forwardPlease answer all 4 questions below: If fiscal budgets don’t need to balance, what should we be trying to balance in an economy? Explain how a government deficit is society’s surplus. If we don’t care about the size of the “deficit”, then is there NO limit on government spending? How does MMT advise that the above problem be handled?arrow_forwardWhat would happen to the budget deficit if the:a) GDP growth rate jumped from 1 percent to 3 percent?b) inflation increased by 2 percentage points?arrow_forward
- An economy is in long-run macroeconomic equilibrium when each of the following aggregate demand shocks occurs. What kind of gap - inflationary or recessionary - will the economy face after the shock, and what type of fiscal policies would help move the economy back to potential output? How would your recommended fiscal policy shift the aggregate demandcurve? (Note: you do not need to draw anything).(a) A stock market boom increases the value of stocks held by households.(b) Firms come to believe that a recession in the near future is likely.(c) Anticipating the possibility of war, the government increases its purchases of military equipment.(d) The quantity of money in the economy declines and interest rates increase.arrow_forwarda) What are the three fiscal policy tools and how would each be used to counter a contractionary gap? b) True or False and explain: Fiscal Policy is effective at reducing the duration of an economic contraction. c) If the spending multiplier is 2.5 and the economy is in a $500 billion contractionary gap, how much should I increase government purchases to eliminate the gap? d) Continuing with c, if the MPC is 0.8, how much would I need to increase transfer payments to eliminate the $500 billion contractionary gap? e) True or False and explain: Households always react to tax changes in a predictable manner. Module 6: Deficits and the Debt. a) Distinguish between deficit and debt. b) Explain what crowding out is and why it reduces the impact of fiscal stimulus. c) True or false and explain: The national debt represents a threat of bankruptcy. (For d and e) Suppose the interest on the debt was $600 billion. If interest is paid domestically, 90% will be spent domestically (the remainder is…arrow_forwardIdentify the effects of fiscal policy on the economyarrow_forward
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