Ec 301 midterm

The growing national deficit is a looming problem in the United States now more than ever. The national debt is constantly increasing and government spending is out of control. If these issues are not solved then they could spell disaster for the nation’s economy when the infamous debt ceiling is finally reached. Currently the national policy on the debt is to continue raising the debt limit until a solution is found that is agreeable between both parties in Congress. The two main issues of over spending and the constant raising of the debts ceiling by Congress can both be resolved by government spending reform, balancing the federal budget and initiating pro-growth policies in order to increase the government’s tax revenue.

"People say, 'Oh, you're going to get tax cuts up front, but you're going to get tax increases at the end. Don't just look at the end,'" he said. "That's part of the bill. That was their choice to make a lot of middle-income West Virginians pay for tax cuts for the

The Trump administration 2018 budget consists of a deficit of approximately 677 billion between 2018 and 2022 if the cuts pass. The previous administration added to the deficit as well, however

“Models of the Phillips curve/aggregate supply relationship based on flexible wages and prices fail to explain persistence in both the price level and inflation whereas those based on nominal rigidities readily explain both.“ Discuss.

Spending and Revenue are divided into ten categories, such as Investments, General Government, etc. Choose three spending categories and one revenue category to write about. What decisions to spend or cut did you make in each of the categories that you chose? Explain your choices. Be sure to read the pro/con arguments for each decision. Which arguments did you find most convincing?

The President of Bartavia wants to enact expansionary fiscal policy with the intention of manipulating inflation and unemployment. Although Bartavia is nearly employing all of its resources in production and extremely close to full employment level, the President is still concerned about the small percentage that is unemployed. Unemployment is the state of a person without a job or a reliable salary or income. Inflation and unemployment are characteristics that are closely monitored to indicate the economic performance of a country. As the economic advisor to the president, I would strongly advise against implementing this policy. Currently, the economy is not in a recession making the trade-offs associated with economic expansion counter intuitive. In addition, the Phillips Curve demonstrates the inverse relationship between inflation and unemployment, making the need for expansionary action unnecessary right now. Finally, Okun 's Law shows how this policy would effect Bartavia 's GDP via the sacrifice ratio. These three reasons show that the long-run consequences outweigh the short-run benefits of expansionary fiscal policy. Therefore, I implore the President to avoid implementing the expansionary policy.

3. (10 points) Use the concepts of gross and net investment to distinguish between an economy that has a rising stock of capital and one that has a falling stock of capital. “In 1933 net private domestic investment was minus $6 billion. This means that in that particular year the economy produced no capital goods at all.” Do you agree? Why or why not? Explain: “Though net investment can be positive, negative, or zero, it is quite impossible for gross investment to be less than zero.”

dollar federal tax cut. This will be made possible by implementing a 16.25 cent on the

A firm's demand for labor depends on, in part, the demand for the firm's product. To summarize this idea, economists say that the demand for labor is:

We can start with the union labor demand elasticity, when wages rise we know that employment has some declines. What we don’t know is how much has employment declined by and how responsive is employment going to changes in the rise of wage rate.

The Tax Policy Center concluded that cutting the corporate tax rate, encouraging business investment and enhancing incentives to work would each encourage economic expansion — modestly. The extra growth would result in maybe $50 billion in new federal revenue over 10 years. To secure these small economic gains and that tiny revenue bump, Republicans would cut taxes by well over a trillion dollars, leaving a massive hole in the budget. Over time, the negative consequences of higher federal borrowing would be a serious drag on the

According to the text book the law of demand states that “there is an inverse relationship between the price of a good or service and the quantity of it that consumers are willing to purchase”. That being said, in general the demand curve will be in a downward slope.

| Advocates of active monetary and fiscal policy view the economy as inherently unstable and believe that policy can manage aggregate demand, and thereby, production and employment, to offset the inherent instability. When aggregate demand is inadequate to ensure full employment, policymakers should boost government spending, cut taxes, and expand money supply. However, when aggregate demand is excessive, risking higher inflation, policymakers should cut government spending, raise taxes, and reduce the money supply. Such policy actions put

Real GDP falls back to its long run equilibrium level at Y0, and prices rise again to P2. However, since the economy is now in equilibrium again there seems no reason for further inflation. The only way that this could lead to inflation, rather than a one-off increase in prices, is if aggregate demand keeps increasing. This can only happen if the government allows the quantity of money supplied to constantly increase.

In the 70’s Friedman developed his theory of inflation on the correlation of inflation and unemployment on the basis of a critical analysis of the (Keynesian) Phillip’s curve. The key elements in the examination of the mutual links between the inflation process and the situation in the labor market are in his construct a natural rate of unemployment, (adaptive) expectations of inflation, as well as a