In the simple two period model of Chapter 9, we demonstrated lian equivalence. In your own word, explain what Ricardian equiva nificance it has for the effectiveness of expansionary fiscal policy. V ions in the simple two period model that allow Ricardian Equivale e some reasons why Ricardian equivalence may not hold in the re

In the simple two period model of Chapter 9, we demonstrated lian equivalence. In your own word, explain what Ricardian equiva nificance it has for the effectiveness of expansionary fiscal policy. V ions in the simple two period model that allow Ricardian Equivale e some reasons why Ricardian equivalence may not hold in the re

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 1P

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Similar questions

What is the main advantage of automatic stabilizers over discretionary fiscal policy?
Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
What is the main reason for employing contractionary fiscal policy in a time of strong economic growth?
What would happen if expansionary fiscal policy was implemented in a recession but, due to lag, did not actually take effect until after the economy was back to potential GDP?
Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below and sketch a diagram using aggregate demand and aggregate supply curves to illustrate your answer: A recession. A stock market collapse that hurts consumer and business confidence. Extremely rapid growth of exports. Rising inflation. A rise in the natural rate of unemployment. A rise in oil prices.
What would happen if contractionary fiscal policy were implemented during an economic boom but, due to Lag, it did not take effect until the economy slipped into recession?
Why is spending by the U.S. government on scientific research at NASA fiscal policy while spending by the University of Illinois is not fiscal policy? Why is a cut in the payroll tax fiscal policy whereas a cut in a state income tax is not fiscal policy?
How would a balanced budget amendment change the effect of automatic stabilizer programs?
What is the difference between discretionary fiscal policy and automatic stabilizers?
What is the main reason for employing expansionary fiscal policy during a recession?
Explain whether or not you agree with the premise of the Ricardian equivalence theory that rational people might reason: Well, a higher budget deficit (surplus) means that Im just going to owe more (less) taxes In the future to pay off all that government borrowing, so Ill start saving (spending) now. Why or why not?
Based on the national saving and investment identity, what are the three ways the macroeconomy might react to greater government budget deficits?