The effects of a larger budget deficit on the level of GDP in the United States.

Question

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Answer 1

Question

Chapter 27, Problem 1DQ

a)

To determine

The effects of a larger budget deficit on the level of GDP in the United States.

a)

Expert Solution

Explanation of Solution

Suppose the government increases its spending and keeps the same tax, then it will lead to a large budget deficit. On the other hand, an increase in public spending without changing the tax rate would increase the level of GDP in the United States.

b)

To determine

The effect of a higher government spending that leads to less spending elsewhere.

b)

Expert Solution

Explanation of Solution

If government spending is switched from some purchases toward other purchases, then the total government spending will not change. If there is no change in government spending, then the GDP will not be affected.

c)

To determine

The effect of a higher government spending that lead

c)

Expert Solution

Explanation of Solution

A continuous increase in public spending without increasing taxes would lead to a larger budget deficit. As a result, GDP would increase, and even if taxes are increased that equal the increase in government spending by an amount less than that the increase in taxes and spending, GDP will rise anyway.

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Students have asked these similar questions

How might an increase in government spending affect the national debt and economic growth in the short term? A. Increase national debt and slow economic growth B. Decrease national debt and stimulate economic growth C. Increase national debt and stimulate economic growth D. Decrease national debt and slow economic growth

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Which of the following is carried out in an expansionary fiscal policy? a. Higher taxes and higher government expenditure b. Lower taxes and higher government expenditure c. Higher taxes and lower government expenditure d. Lower taxes and lower government expenditure.

Answer 2

Question

Chapter 27, Problem 1DQ

a)

To determine

The effects of a larger budget deficit on the level of GDP in the United States.

a)

Expert Solution

Explanation of Solution

Suppose the government increases its spending and keeps the same tax, then it will lead to a large budget deficit. On the other hand, an increase in public spending without changing the tax rate would increase the level of GDP in the United States.

b)

To determine

The effect of a higher government spending that leads to less spending elsewhere.

b)

Expert Solution

Explanation of Solution

If government spending is switched from some purchases toward other purchases, then the total government spending will not change. If there is no change in government spending, then the GDP will not be affected.

c)

To determine

The effect of a higher government spending that lead

c)

Expert Solution

Explanation of Solution

A continuous increase in public spending without increasing taxes would lead to a larger budget deficit. As a result, GDP would increase, and even if taxes are increased that equal the increase in government spending by an amount less than that the increase in taxes and spending, GDP will rise anyway.

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Answer 3

Question

Chapter 27, Problem 1DQ

a)

To determine

The effects of a larger budget deficit on the level of GDP in the United States.

a)

Expert Solution

Explanation of Solution

Suppose the government increases its spending and keeps the same tax, then it will lead to a large budget deficit. On the other hand, an increase in public spending without changing the tax rate would increase the level of GDP in the United States.

b)

To determine

The effect of a higher government spending that leads to less spending elsewhere.

b)

Expert Solution

Explanation of Solution

If government spending is switched from some purchases toward other purchases, then the total government spending will not change. If there is no change in government spending, then the GDP will not be affected.

c)

To determine

The effect of a higher government spending that lead

c)

Expert Solution

Explanation of Solution

A continuous increase in public spending without increasing taxes would lead to a larger budget deficit. As a result, GDP would increase, and even if taxes are increased that equal the increase in government spending by an amount less than that the increase in taxes and spending, GDP will rise anyway.

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Answer 4

Question

Chapter 27, Problem 1DQ

a)

To determine

The effects of a larger budget deficit on the level of GDP in the United States.

a)

Expert Solution

Explanation of Solution

Suppose the government increases its spending and keeps the same tax, then it will lead to a large budget deficit. On the other hand, an increase in public spending without changing the tax rate would increase the level of GDP in the United States.

b)

To determine

The effect of a higher government spending that leads to less spending elsewhere.

b)

Expert Solution

Explanation of Solution

If government spending is switched from some purchases toward other purchases, then the total government spending will not change. If there is no change in government spending, then the GDP will not be affected.

c)

To determine

The effect of a higher government spending that lead

c)

Expert Solution

Explanation of Solution

A continuous increase in public spending without increasing taxes would lead to a larger budget deficit. As a result, GDP would increase, and even if taxes are increased that equal the increase in government spending by an amount less than that the increase in taxes and spending, GDP will rise anyway.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 27, Problem 1DQ

a)

To determine

The effects of a larger budget deficit on the level of GDP in the United States.

a)

Expert Solution

Explanation of Solution

Suppose the government increases its spending and keeps the same tax, then it will lead to a large budget deficit. On the other hand, an increase in public spending without changing the tax rate would increase the level of GDP in the United States.

b)

To determine

The effect of a higher government spending that leads to less spending elsewhere.

b)

Expert Solution

Explanation of Solution

If government spending is switched from some purchases toward other purchases, then the total government spending will not change. If there is no change in government spending, then the GDP will not be affected.

c)

To determine

The effect of a higher government spending that lead

c)

Expert Solution

Explanation of Solution

A continuous increase in public spending without increasing taxes would lead to a larger budget deficit. As a result, GDP would increase, and even if taxes are increased that equal the increase in government spending by an amount less than that the increase in taxes and spending, GDP will rise anyway.

Answer 6

Chapter 27, Problem 1DQ

a)

To determine

The effects of a larger budget deficit on the level of GDP in the United States.

a)

Expert Solution

Explanation of Solution

Suppose the government increases its spending and keeps the same tax, then it will lead to a large budget deficit. On the other hand, an increase in public spending without changing the tax rate would increase the level of GDP in the United States.

Answer 7

Chapter 27, Problem 1DQ

a)

To determine

The effects of a larger budget deficit on the level of GDP in the United States.

Answer 8

a)

Expert Solution

Explanation of Solution

Suppose the government increases its spending and keeps the same tax, then it will lead to a large budget deficit. On the other hand, an increase in public spending without changing the tax rate would increase the level of GDP in the United States.

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

b)

To determine

The effect of a higher government spending that leads to less spending elsewhere.

b)

Expert Solution

Explanation of Solution

If government spending is switched from some purchases toward other purchases, then the total government spending will not change. If there is no change in government spending, then the GDP will not be affected.

Answer 13

b)

To determine

The effect of a higher government spending that leads to less spending elsewhere.

Answer 14

b)

Expert Solution

Explanation of Solution

If government spending is switched from some purchases toward other purchases, then the total government spending will not change. If there is no change in government spending, then the GDP will not be affected.

Answer 15

b)

Expert Solution

Answer 16

b)

Expert Solution

Answer 17

Expert Solution

Answer 18

c)

To determine

The effect of a higher government spending that lead

c)

Expert Solution

Explanation of Solution

A continuous increase in public spending without increasing taxes would lead to a larger budget deficit. As a result, GDP would increase, and even if taxes are increased that equal the increase in government spending by an amount less than that the increase in taxes and spending, GDP will rise anyway.

Answer 19

c)

To determine

The effect of a higher government spending that lead

Answer 20

c)

Expert Solution

Explanation of Solution

A continuous increase in public spending without increasing taxes would lead to a larger budget deficit. As a result, GDP would increase, and even if taxes are increased that equal the increase in government spending by an amount less than that the increase in taxes and spending, GDP will rise anyway.