Question

All else equal, if the United States’ next president is a fiscal conservative that pushes through...

All else equal, if the United States’ next president is a fiscal conservative that pushes through a balanced budget,

  • A. interest rates should rise.
  • B. the current account deficit should be reduced.
  • C. the current account deficit will likely get larger.
  • D. the economy should expand more rapidly.
  • E. none of the above.

Homework Answers

Answer #1

In a balanced budget, Government Spending= Taxes

According to National Income Identity in an open Economy,

Taxes–Government Spending+ Savings–Investment= Exports–Imports

If the Next United States President is fiscal conservative that pushes through a balanced budget, then the Taxes rise upto the level of Government Spending, this leads to an increase in the value left hand side of the equation above. If the value of left hand side Increases, the value of right hand side must Increase. Thus, Either Exports Increase or imports Decrease or both. This ultimately leads to a reduction in Current Account Deficit.

Thus, Option B is correct.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The United States has had a Current Account deficit for decades, yet the economy continues to...
The United States has had a Current Account deficit for decades, yet the economy continues to expand. How can this be? Should a Current Account surplus be a policy objective? Do these Current Account deficit really matter?
1. Holding everything else constant, the multiplier effect of a $100 tax cut : a)is the...
1. Holding everything else constant, the multiplier effect of a $100 tax cut : a)is the same as the multiplier effect of a $100 increase in G. b)is smaller than the multiplier effect of a $100 increase in G. c)is larger than the multiplier effect of a $100 increase in G. d)may be smaller than, larger than, or equal to the multiplier effect of a $100 increase in G. 2. When the government borrows funds in financial markets to pay...
The United States federal government is responsible for meeting the spending obligations of the US government,...
The United States federal government is responsible for meeting the spending obligations of the US government, or its "unpaid bills." Krugman & Wells (2015), explained if taxes are insufficient to cover government spending then the federal government must borrow to cover the difference. These government borrowing are US Treasuries (Chapter 10, Matching Up Savings and Investment Spending). Reuters (2018, February 18) reported, “…tax reform is expected to add as much as $1.5 trillion to the federal debt load, while the...
If the economy is full employment, an increase in aggregate demand will most likely lead to:...
If the economy is full employment, an increase in aggregate demand will most likely lead to: a reduction in the general level of prices an increase in unemployment an increase in real output, but not in prices an increase in prices, but not in real output. In order to reduce the rate of inflation in a rapidly growing, full-employment economy, it would be appropriate for the Federal Reserve to Increase income tax rates Sell government bonds Reduce reserve requirements Print...
1.If the MPC is equal to 0.9 and investment spending increases by $50 billion what is...
1.If the MPC is equal to 0.9 and investment spending increases by $50 billion what is the result a.GDP increases $450M GDP increases $ 50M GDP increases $500M GDP decreases $450M 2.Rising inventories usually indicate: A.an economy that grows unexpectedly. B.an economy that slows unexpectedly C.an unexpected spurt in sales. D.an inflationary cycle. 3.Lowering taxes and increasing spending will likely A.Increase Deficits and the National Debt B.Decrease Deficits and the National Debt C.Have no impact on Deficits or the National...
Use the information in the following table to answer questions 1 through 4: Exports of goods...
Use the information in the following table to answer questions 1 through 4: Exports of goods & services: $1000 Imports of goods & services: $1200 Net change in assets owned abroad: $100 Net change in foreign owned assets at home: $360 Unilateral transfers received: $130 Unilateral transfers paid: $200 Investment income paid to foreigners: $380 Investment income received from foreigners: $400 Balance on the capital account: $0 Statistical Discrepancies: $0 1. The balance on the current account is _________. A)...
1. Roland is the president of the United States. In an attempt to make prescription drug...
1. Roland is the president of the United States. In an attempt to make prescription drug prices cheaper, he has imposed a binding price ceiling on drugs. What would he expect his critics to say? A. the binding price ceiling will encourage companies to overproduce drugs and will result in waste. B. the binding price will discourage patients from obtaining the drugs they need. C. the binding price ceiling will increase the likelihood that consumers will obtain needed drugs on...
In the early 1980s, the Federal Reserve pursued a tight monetary policy. All else being equal,...
In the early 1980s, the Federal Reserve pursued a tight monetary policy. All else being equal, the impact of that policy was to __________ interest rates in the United States relative to those in Europe and cause the dollar to __________ against European currencies. Select one: a. increase; appreciate b. decrease; depreciate c. increase; depreciate d. decrease; appreciate Based on the supply and demand model of the exchange rate, which of the following should cause the Indian Rupee to appreciate?...
The estate tax in the United States is a progressive tax on the estate of a...
The estate tax in the United States is a progressive tax on the estate of a deceased person before their property (real estate, stocks and bonds, business interests, etc.) is transferred to their heirs. In 1906, President Theodore Roosevelt proposed a federal estate tax, saying, "The man of great wealth owes a particular obligation to the State because he derives special advantages from the mere existence of government." The estate tax was passed in the Emergency Revenue Act of 1916...
please answer all of them i dont have enough time left, thank you 13. The ultimate...
please answer all of them i dont have enough time left, thank you 13. The ultimate purpose of fundamental stock valuation is: A. to eliminate stocks of those companies that are potential losers from the portfolio. B. to identify for purchase those companies that are fundamentally undervalued. C. to learn to identify peaks and troughs of the business cycle. D. Two of the above. 16. All of the following are disadvantages of fiscal policy, except: A. a long implementation lag....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT