Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Chapter 31, Problem 16CTQ

Assume there is no discretionary increase in government spending. Explain how an improving economy will affect the budget balance and, in turn, investment and the trade balance.

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Assume there is no discretionary increase in government spending. Explain how an improving economy will affect the budget balance and, in turn, investment and the trade balance.
Consider the economy of Canada. Its households spend 55% of increases in their income and saves 45 %. There are no taxes and no foreign trade. Currently, Canada has a recessionary gap, the governments aim is to get actual output to increase by 220 billion dollars. How much of a tax cut do they need to have to achieve the overall increase in output of 220 billion dollars?
Which economic policies affect a government's budget and include the increase or decrease the money supply?

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Principles of Economics 2e

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