Chapter13: Federal Deficits, Surpluses, And The National Debt
Section: Chapter Questions
Problem 13SQ
Related questions
Question
- Increasing taxes to reduce national debt is more damaging to the economy than spending reforms because
- Tax hikes are much easier to implement and more successful at reducing debt in the long-run but lead to crowding-in, lower debt to
GDP ratio, less small business formation hurtingeconomic growth and reducing tax revenue through the Laffer curve effect. - Tax hikes harm economic recovery slowing growth, reducing GDP by more than the tax revenue gained, while increasing
unemployment and the need for more government spending, and thus are self-defeating. - Tax hikes shift aggregate demand and
aggregate supply left, but spending reforms do not.
4. All of the answers are correct.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning