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 32, Problem 3TY
To determine
Explain the effect of deficit.
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Chapter 32 Solutions
Economics: Principles & Policy
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- When the economy is in a recessionary mode, what will likely be the actions by government using fiscal policy? Is it better to concentrate on aggregate demand or aggregate supply? Why?arrow_forwardOne of the main arguments against using Fiscal Policy is the crowding out effect. Suppose the government uses government purchases to stimulate the economy. Explain quantitative easing? If the Fed’s current policy is quantitative easing, do you think that there is a danger of the government’s current fiscal policy being crowded out? Why or Why not? Explanation required.arrow_forwardSummarize MMT in one sentence. Why should federal debt be thought of differently than household debt? 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_forward
- Will a budget deficit be more expansionary if it is financed by borrowing from the Federal Reserve or from the general public? Explain.arrow_forwardRead the following quote and explain in complete sentences whether it discusses fiscal policy, monetary policy or both. “Taking substantial action at this point, though, would send what could be a negative message to the market — that the balance sheet runoff, which former Chair Janet Yellen said would be ‘like watching paint dry,’ is running into snags and requires corrective action. However, the Fed would have no choice if there are indications that it can't control the market movements, particularly considering the record level of Treasury debt the government has issued this year.”arrow_forwardRelevant knowledge is important because it is important to understand that the federal budget deficit affects all aspects of the economy, but also the state of the economy affects the federal budget. Suppose that the federal budget is balanced when GDP is at potential GDP. If equilibrium GDP falls below potential, how and why would tax receipts change?arrow_forward
- In mid-2001, the Bush administration won congressional approval for lower income tax rates. One stipulation of this rate cut was that the rates also be applied retroactively to taxes from the year 2000. Question: Would you consider this fiscal policy to be demand-side focused, supply-side focused, or both? Explain your response.arrow_forwardWhat kind of fiscal policy will you use to fight against inflation. Explain it briefly.arrow_forwardwhen is the most appropriate time economically speaking for the federal budget be in a deficit?arrow_forward
- Listen: Podcast: The Economics of Fiscal Stimulus - Econ EveryDay The Covid-19 pandemic shifted the aggregate supply and aggregate demand curves to the left. Did that increase or decrease real GDP, employment, and inflation rate? Explain your answer. The website - https://econeveryday.com/podcast-the-economics-of-fiscal-stimulus/arrow_forwardWhat is the difference between federal purchases and federal expenditures? Are federal purchases higher today as a percentage of GDP than they were in 1960? Are federal expenditures as a percentage of GDP higher?arrow_forward"Define in a formula, the federal budget deficit." please with explanation !! thank you !arrow_forward
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