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Economics For Today

10th Edition
Tucker
Publisher: Cengage Learning
ISBN: 9781337613040

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BuyFindarrow_forward

Economics For Today

10th Edition
Tucker
Publisher: Cengage Learning
ISBN: 9781337613040
Chapter 23, Problem 11SQP
Textbook Problem
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Suppose you are the economic policy adviser to the president and are asked what should be done to eliminate a federal deficit. What would you recommend?

To determine

Economic policy to eliminate the federal deficit.

Explanation of Solution

The budget deficit occurs when the government expenditures are higher than the government revenues. When there is a federal budget deficit, it will be financed with the borrowings from the government securities. The government securities include the Treasury bills, Treasury notes, and the Treasury bonds. Thus, the Treasury would depend on the sale of all these government securities in order to raise the money for financing the budget deficit.

This policy cannot be always accepted because the government budget deficit would be present because of various reasons...

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