what factors might degrade the expansionary effects of government deficit spending
what factors might degrade the expansionary effects of government deficit spending
Homework Answers
A decline in the marginal propensity to consume, increase in the rate of interest as a result of government deficit, any exogenous shock with the trading partner, an increase in the marginal propensity to import, all of these can have degrading effect on the expansionary effect of government deficit spending.
When consumers are not willing to consume more, this reduces the multiplier, and the multiplier effect of government spending. Higher interest rate results in crowding out of private investment which reduces original increase in the aggregate demand due to multiplier effect. Increase in marginal propensity to consume will result in increasing imports decreasing exports and therefore decreasing the aggregate demand.
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what factors might degrade the expansionary effects of government
deficit spending
Compare the effects of an expansionary fiscal policy action—an increase in government spending financed by government...
Compare the effects of an expansionary fiscal policy action—an increase in government spending financed by government bond sales to the public, for example—in the Keynesian and classical models. Include in your answer the effects of this policy shift on the level of real income, employment, the price level, and the rate of interest.
If the central bank wants to discourage the government from deficit spending, what options are open...
If the central bank wants to discourage the government from deficit spending, what options are open it? What are the side effects of such option?
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1. When the government increases spending by issuing more bonds, it causes: a) nations currency to appreciate b)exports increase c)interest rates decrease d)demand for loanable funds decrease e)decreases merchandise trade deficit 2. When the Fed decreases money supply to combat inflation, it cuases: a)the price of the U.S. dollar to decrease b) capital to flow out of the US c)an increase in the merchandise trade deficit d)an increase in private spending e) a decrease in the interest rates 3. Which...
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1. Government spending required by laws other than appropriation acts is also known as what? a....
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1. GDP - annual debt 2. government spending - tax revenue >0 3.government spending - tax...
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2. government spending - tax revenue >0
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4. annual debt/GDP
5 annual deficit/GDP
6. total debt - debt held by us households and institutions
==================================================
A budget deficit is government spending in excess of what?
A.. tax revenues
B. real GDP
C. household spending
D. consumption
================================================
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jumped from 2 percent to 4 percent?
A.decrease in deficit...
Where does the U.S. government get money to pay for its deficit spending? (Macroeconomics) Thanks!
Where does the U.S. government get money to pay for its deficit spending? (Macroeconomics) Thanks!
36. True or False: In order to accomplish the same change in aggregate demand, the government...
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Question 10 (1 point) If the government runs a deficit too big, the interest rate might...
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1. GDP - annual debt
2. government spending - tax revenue >0
3.government spending - tax revenue <0
4. annual debt/GDP
5 annual deficit/GDP
6. total debt - debt held by us households and institutions
==================================================
A budget deficit is government spending in excess of what?
A.. tax revenues
B. real GDP
C. household spending
D. consumption
================================================
What would happen to the cyclical deficit if the GDP growth rate
jumped from 2 percent to 4 percent?
A.decrease in deficit...
36. True or False: In order to accomplish the same change in aggregate demand, the government will always need to increase spending more than a change a tax. a. True b. False 37. When the government increases taxes and government spending by the same amount a. The Ricardo-Barro effect predicts less savings and the government is still b. The government must increase the deficit to finance the spending and the c. There is no change in the government budget deficit...
Question 10 (1 point) If the government runs a deficit too big, the interest rate might increase. Investment is negatively related to the interest rate. However, Keynesian economists believe that I isn't very sensitive to the interest while Classical ones believe it is. Why does it explain (partially) why classical economists are more against the government spending money to stimulate the economy? (Note: difficult question as well] The less sensitive the investment is (to the interest rate), the more the...
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