Question

In: Economics

Suppose the U.S. government announces that it will bring the federal budget deficit to zero, over...

Suppose the U.S. government announces that it will bring the federal budget deficit to zero, over the next ten years, with no change in tax rates. Describe the effects of such a policy according to the three business cycle models, assuming that the policy is fully credible) Suppose the U.S. government announces that it will bring the federal budget deficit to zero, over the next ten years, with no change in tax rates. Describe the effects of such a policy according to the three business cycle models, assuming that the policy is fully credible) Suppose the U.S. government announces that it will bring the federal budget deficit to zero, over the next ten years, with no change in tax rates. Describe the effects of such a policy according to the three business cycle models, assuming that the policy is fully credible

Solutions

Expert Solution


Related Solutions

Suppose the U.S. government announces that it will bring the federal budget deficit to zero, over...
Suppose the U.S. government announces that it will bring the federal budget deficit to zero, over the next ten years, with no change in tax rates. Describe the effects of such a policy according to the three business cycle models, assuming that the policy is fully credible
Suppose the U.S. government announces that it will bring the federal budget deficit to zero, over...
Suppose the U.S. government announces that it will bring the federal budget deficit to zero, over the next ten years, with no change in tax rates. Describe the effects of such a policy according to the three business cycle models, assuming that the policy is fully credible
The U.S. is a large economy with a trade deficit. Suppose the U.S. federal government increases...
The U.S. is a large economy with a trade deficit. Suppose the U.S. federal government increases income tax. How will this policy affects the U.S. saving, investment, real interest rate, and capital flows? Is it possible to prevent changes due to this tax policy? If yes, how? Explain reasoning.
Suppose that the federal government begins to run a large budget deficit at a time when...
Suppose that the federal government begins to run a large budget deficit at a time when many productive resources are idle factories are operating far below capacity in most industries, and there are surplus of labour in almost every area of the economy. How might the existence of all these idle resources prevent even a very large increase in government borrowing from leading to an increase in interest rates? If you found part (a) hard to answer, ask yourself whether...
1.Suppose that the federal government has a budget deficit and the economy is closed. Using the...
1.Suppose that the federal government has a budget deficit and the economy is closed. Using the savings–investment spending identity, explain how this affects investment spending. 2.The market for loanable funds is in equilibrium. All else equal, the federal government has eliminated taxes on interest earned from savings. Describe how this will affect the market for loanable funds, the equilibrium interest rate, and the equilibrium quantity of loanable funds.
Explain the connection between the federal government budget deficit in the early '80s and the accompanying...
Explain the connection between the federal government budget deficit in the early '80s and the accompanying twin foreign trade deficit. Would you expect the same in the current economic situation the country is facing? Explain.
An increase in the federal government budget deficit will cause the: saving function to shift inward...
An increase in the federal government budget deficit will cause the: saving function to shift inward . investment function to shift inward . saving function to shift outward . investment function to shift outward .
Should the federal Government have a balanced budget (i.e. revenues = expenses), or is a deficit...
Should the federal Government have a balanced budget (i.e. revenues = expenses), or is a deficit –OK? What are some of the positive reasons to run a deficit?
Suppose federal government announces the plan to double the number of immigrants in 10 years from...
Suppose federal government announces the plan to double the number of immigrants in 10 years from now. What would be the impact on current rent and price implied by the four quadrant model? Draw the diagram. Mark the initial equilibrium and the equilibrium after the announcement on the diagram. Label all the axes and equilibriums properly. Write down all the equations corresponding to each curve.
Effects of a government budget deficit
3. Effects of a government budget deficitConsider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget.Screen Shot 2020-10-09 at 3.24.05 PM.pngGiven the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT