Macroeconomics
Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 31, Problem 21APA
To determine

Determine how the government will overcome the budget deficit.

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During the most recent recession,some economists argued that the change in the interest rates that comes about due todeficit spending implied in the demand and supply of financial capital graph would not occur. A simple reason was that the government was stepping in to invest when private firms were not. Using a graph, explain how the use by government ininvestment off sets the deficit demand.
Critics of “new accounting” for federal borrowing argue that it does not matter what the government spends the money for. What matters is the total amount that the government spends minus taxes collected. Explain this viewpoint.
Do treasury securities finance a federal budget deficit? If so would the government purchase treasury securities to finance the budget deficit or would they sell them?
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