Question

A country imports wine, exports steel, and has a floating exchange rate. If it increases government expenditures on health care but not taxes, how are the following groups affected:

a. hospital workers;

b. steel mill workers;

c. wine bars that serve French wine;

d. house buyers who borrow money to finance their purchase?

Answer 1

a. There would be increase in revenue for the hospital sectors as the expenditure by government would create more business for health sector

b. These would get benefited as the expenditure by government would help to get medical facilities at lesser rates.

c. With the increase in expenditure on health, people would be able to work and improves their productivity too which increases the economic activity there by increasing the demand for wine

d. Here too, people would demand for money to finance their purchases because of increased economic activity.