The Focus box “Can a Budget Deficit Reduction Lead to an Output Expansion? Ireland in the 1980s” provides an example of fiscal consolidation. Ireland had a large budget deficit in 1981 and 1982. What does a deficit reduction imply for the medium run and the long run? What are the advantages of reducing the deficit?

The Focus box “Can a Budget Deficit Reduction Lead to an Output Expansion? Ireland in the 1980s” provides an example of fiscal consolidation. Ireland had a large budget deficit in 1981 and 1982. What does a deficit reduction imply for the medium run and the long run? What are the advantages of reducing the deficit?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter16: Expectations Theory And The Economy

Section: Chapter Questions

Problem 10QP

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The Focus box “Can a Budget Deficit Reduction Lead to an Output Expansion? Ireland in the 1980s” provides an example of fiscal consolidation. Ireland had a large budget deficit in 1981 and 1982. Although the data shows strong output growth from 1987 to 1989, there is some evidence of continued macroeconomic weakness in Ireland during the second fiscal consolidation. What is that evidence?
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