Economics: Principles & Policy
Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 27, Problem 4TY
To determine

The possible action to reduce income by $120 when an inflationary gap exists.

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Respond to all parts of the question. In your response, use substantive examples where appropriate. Use the pie charts to answer the following questions. Identify the percentage of the budget that was mandatory spending in 1968. Describe a change over time in the pie charts.
Why does the budget require a forecast of the economy? Under what circumstances would actual government spending and tax revenue fall to match the budget as approved?
Government is considering a policy change to stimulate the economy by encouraging private consumption by reducing sales taxes. The loss of tax revenue will be made up by increasing taxes on corporate profits and excess savings. What are the short- and long-term effects of such a change?
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