Macroeconomics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280601
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Question
Chapter 11, Problem 1DQ
a)
To determine
To explain: The effect of larger budget deficit on the
b)
To determine
To explain: The impact on GDP of U.S. if the less spending elsewhere and total government purchases remained the same.
c)
To determine
To explain: The impact on GDP of U.S. if the government increases the taxes for the higher spending.
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Students have asked these similar questions
The following transactions took place in Ecoland in 2018:
Trillions of 2014 dollars
Government purchases
400
Taxes
360
Firms’ profits
300
Investment
400
Consumption expenditure
1000
Wages paid to labor
1400
Exports
300
Government transfer payments
150
Imports
350
(a). Calculate Ecoland’s real GDP in 2018, i.e., GDP measured in 2014 $.
(b) How much do households save in Ecoland? Is it enough to finance domestic investment?
(c) Does the government have a balanced budget? If not, what is the surplus or deficit?
(d) If Ecoland’s nominal GDP in 2018 is $1900 trillion, how much inflation has Ecoland experienced since 2014?
Suppose actual real GDP is $13.19 trillion, potential real GDP is $12.96 trillion, the marginal propensity to consume is 0.75, and that the government has a balanced budget. If we ignore price effects, by how many trillions of dollars should the government change its spending to fix the gap while keeping the federal budget balanced? (Round this to two digits after the decimal and enter this value as either a positive value or a negative value without the dollar sign.)
Explain fiscal policy and its role in stabilizing economies during recessions.
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Macroeconomics: Principles and Policy (MindTap Course List)
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