If the Ricardian equivalence holds true, then... Select the correct answer below: increasing the budget deficit will cause individuals to increase their own spending increasing the budget deficit in a downturn will have no stimulating effect on the economy O increasing the budget deficit in a downturn will benefit the economy increasing the budget deficit will have no impact on the choices of individuals and businesses to save and invest

If the Ricardian equivalence holds true, then... Select the correct answer below: increasing the budget deficit will cause individuals to increase their own spending increasing the budget deficit in a downturn will have no stimulating effect on the economy O increasing the budget deficit in a downturn will benefit the economy increasing the budget deficit will have no impact on the choices of individuals and businesses to save and invest

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Role And Effects Of Government

Section: Chapter Questions

Problem 11QP

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To eliminate the deficit (and halt the growth of the net public debt), a politician suggests that “we should tax the rich.” The politician makes a simple arithmetic calculation in which he applies a higher tax rate to the total income reported by “the rich” in a previous year. He says that the government could thereby solve the deficit problem by taxing “the rich.” What is the major fallacy in such a claim?
If 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 overseas
Explain whether or not you agree with the premise of the Ricardian equivalence theory that rational people might reason: “Well, a higher budget deficit (surplus) means that I’m just going to owe more (less) taxes in the future to pay off all that government borrowing, so I’ll start saving (spending) now.” Why or why not?
Assume there is no discretionary increase in government spending. Explain how an improving economy will affect the budget balance and, in turn, investment and the trade balance.
Define saving and investment. Data for the simple economy of Newt show that in 2011, saving exceeded investment and the government is running a balanced budget.What is likely to happen ? What would happen if the government were running a deficit and saving were equal to investment ?
In which of the following cases does the size of the government’s debt and deficit indicate potential problems for the economy? Explain your answer. a) The government’s debt is relatively low, but the government is running a large budget deficit as it builds a high-speed rail system to connect the major cities of the nation. b) The government’s debt is relatively high due to a recently ended deficit-financed war, but the government is now running only a small budget deficit. c) The government’s debt is relatively low, but the government is running a budget deficit to finance the interest payments on the debt. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Answer the following questions: As you know, the US government has been running budget deficits for several years now. In your opinion, and based on economic reasoning, what will happen to the US economy if the US Federal Government continues to run annual budget deficits for the next decade. Will the economy survive that? Will the economy grow? Will it grow as fast as it could? Will the deficits cause the economy to grow faster? Will it grow at all? These are some of the questions you might address in your primary post.
Answer the questions below for the economy of Motak using the graph below. Government spending / net taxes 1000 900 800 700 600 500 400 300 200 100 0 The Economy of Motak 400 800 1200 1600 2000 Real GDP NTR G1 Tools / G₂ B a. If GDP is $1,200 and government spending is G₁, the size of Motak's budget deficit is $ b. If government spending is decreased by the size of the deficit in part (a), draw the new curve labelled G2 in the graphing area above. c. Suppose the multiplier has a value of 2, the new level of equilibrium GDP is $ d. Motak's deficit at this new level of equilibrium GDP is $ billion. billion. billion.
The table sets out the data for an economy when the government's budget is balanced. The quantity of loanable funds demanded increases by $1.5 billion at each real interest rate and the quantity of loanable funds supplied increases by $0.5 billion at each interest rate If, at the same time the government budget becomes a deficit of $1.0 billion, what are the real interest rate and investment? Does any crowding out occur? >>> Answer to 1 decimal place The real interest rate is Investment is $ billion. There OA. is, HI percent a year crowding out in this situation because OB. is no the deficit increases the real interest rate, which decreases investment investment is $7.0 billion Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds demanded supplied (billions of 2007 dollars) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 5.0 5.5 6.0 6.5 7.0 7.5 8.0
In what ways do future generations benefit from this generation’s deficit spending? Cite three examples.
Suppose that Antonio, an economist from a business school in Georgia, and Caroline, an economist from a university in Massachusetts, are arguing over budget deficits. The following dialogue shows an excerpt from their debate: Caroline: Most people recognize that the budget deficit has been rising considerably over the last century. We need to find the best course of action to remedy this situation. Antonio: I believe that a cut in income tax rates would boost economic growth and raise tax revenue enough to reduce budget deficits. Caroline: I actually feel that raising the top income tax rate would reduce the budget deficit more effectively. The disagreement between these economists is most likely due to . Despite their differences, with which proposition are two economists chosen at random most likely to agree? Having a single income tax rate would improve economic performance. Immigrants receive more in government benefits than they contribute in taxes.…
What is meant by revenue deficit and what does it indicate