Question

1. Suppose the federal government cuts taxes and increases spending, raising the budget deficit to 9...

1. Suppose the federal government cuts taxes and increases spending, raising the budget deficit to 9 percent of GDP. If nominal GDP is rising 4 percent per year, such budget deficits are/are not sustainable forever.

2. True or False: If budget deficits of this size are maintained for 20 years, future generations will likely pay roughly equal taxes.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Budget deficit is 9% of GDP. GDP is growing at 4 percent per year so that the budget deficits are not sustainable. For sustainaibility, the two rates should be same so that the entire budget deficit is financed by the new increase in GDP.

It is false that future generations will likely pay roughly equal taxes.This is because if this situation is continued, deficit will not be able to financed by in new increase in GDP so that taxes would be quite higher in future.Hence savings should be increased.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
If the federal government wished to reduce the deficit to any significant degree without raising taxes,...
If the federal government wished to reduce the deficit to any significant degree without raising taxes, where would the reduced spending likely to have to come from?
Suppose the government reduces taxes but holds government spending constant, thus increasing the government budget deficit....
Suppose the government reduces taxes but holds government spending constant, thus increasing the government budget deficit. 1. What would be the major effect in the market for loanable funds?                   Increase in demand for loanable funds (increased supply of bonds)                                  Decrease in demand for loanable funds (decreased supply of bonds)                   Increase in supply of loanable funds (increased demand for bonds)                   Decrease in supply of federal funds (decreased demand for bonds) Why? 2. Graphically illustrate the effect on the equilibrium interest rate...
The aggregate expenditures model demonstrates that balanced budget (equal increases in government spending and taxes) in...
The aggregate expenditures model demonstrates that balanced budget (equal increases in government spending and taxes) in modern economies
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...
QUESTION 14 Changes in government spending and/or taxes as the result of legislation is called open...
QUESTION 14 Changes in government spending and/or taxes as the result of legislation is called open market operations of the Federal Reserve fiscal policy balanced budget operations monetary policy QUESTION 15 Contractionary fiscal policy is deliberate government action to influence aggregate demand and the level of real GDP through expanding and contracting the money supply encouraging business to expand or contract investment regulating net exports. decreasing government spending or increasing taxes QUESTION 16 Expansionary fiscal policy consists of increasing government...
1. The budget surplus is defined as taxes less transfers and government purchases, T − G,...
1. The budget surplus is defined as taxes less transfers and government purchases, T − G, where T is net taxation (taxes less transfers) and G is government purchases. If the government has collected more than it has spent, the term T − G is positive and the budget is in surplus. If T − G < 0 then the budget is in deficit. Recall that T and G are flows (as is GDP). The budget deficit or surplus is...
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...
1. Which of the following would decrease the size of a federal budget deficit? ?A recession...
1. Which of the following would decrease the size of a federal budget deficit? ?A recession ?An increase in defense spending ?An increase in the use of automatic stabilizers ?An increase in taxes ?An increase in transfer payments 2. Which of the following is true of the federal budget process in the U.S.? Congress must approve a budget with at least a two-thirds majority vote. The federal budget must be balanced each year because the volume of international trade reduces...
2) A spike in “All Other Outlays” of the federal government in 2009 was due to:...
2) A spike in “All Other Outlays” of the federal government in 2009 was due to: a) an increase in the financial aid given to Greece earlier that year. b) an increase in the expenditures on Social Security and Medicare. c) the fiscal stimulus package passed earlier that year. d) a sudden increase in military expenditure as a result of the war in Iraq. e) an increase in the national debt earlier that year. 3) In 2016, welfare spending accounted...
exam3 #12 CBO expects higher​ long-term deficits The Congressional Budget Office​ (CBO) says the national debt...
exam3 #12 CBO expects higher​ long-term deficits The Congressional Budget Office​ (CBO) says the national debt is on an upward path and will hit 122 percent of GDP in 2040. Healthcare programs and Social Security benefits are the large drivers of spending over the coming decades. ​Source: The Wall Street Journal​, July​ 12, 2016 If the government decided to slow the growth of debt by cutting transfer payments and raising taxes by the same​ amount, how would this fiscal policy...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT