Explanation The Great Recession and policy response resulted to have rocketed the federal deficit above $1 trillion and sharply increased the national debt to a level that is not sustainable. Federal deficits of one generation can affect the standard of living of the next generation, as a larger share of the budget goes toward servicing the debt. One sign of possible problems in the United States was the downgrading of the nation’s credit rating in 2011. For the first time in 70 years U.S. federal debt was rated as more risky. Research suggests that a high federal debt slows the economy, and the slowdown can last for years. To head off a fiscal crisis, policy makers must cut federal spending, raise taxes, or some combination of the two...

5th Edition

ISBN: 9781337000529

Author: William A. McEachern

Publisher: Cengage Learning

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Question

Chapter 12, Problem 4.10P

To determine

Sustainability of large federal deficits and growing federal debt and learning experience from other countries.

Concept Introduction: Federal debt is a budgetary situation when the expenses incurred by the government are over and above the tax revenues taken in.

Expert Solution & Answer

Chapter 12 Solutions

ECON MACRO

Ch. 12 - Prob. 1.1P Ch. 12 - Prob. 1.2P Ch. 12 - Prob. 2.3P Ch. 12 - Prob. 2.4P Ch. 12 - Prob. 3.5P Ch. 12 - Prob. 3.6P Ch. 12 - Prob. 3.7P Ch. 12 - Prob. 3.8P Ch. 12 - Prob. 4.10P Ch. 12 - Prob. 4.9P

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Is expansionary fiscal policy more attractive to politicians who believe in larger government or to politicians who believe in smaller government? Explain your answer.

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