Chapter 18: Problem 19
Explain how a shift from a government budget deficit to a budget surplus might affect the exchange rate.
Chapter 18: Problem 19
Explain how a shift from a government budget deficit to a budget surplus might affect the exchange rate.
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Get started for freeExplain how decreased domestic investments that occur due to a budget deficit will affect future economic growth.
Describe how a plan for reducing the government deficit might affect a college student, a young professional, and a middle-income family.
In the late 1990 s, the U.S. government moved from a budget deficit to a budget surplus and the trade deficit in the U.S. economy grew substantially. Using the national saving and investment identity, what can you say about the direction in which saving and/or investment must have changed in this economy?
Imagine an economy in which Ricardian equivalence holds. This economy has a budget deficit of \(50,\) a trade deficit of \(20,\) private savings of \(130,\) and investment of \(100 .\) If the budget deficit rises to \(70,\) how are the other terms in the national saving and investment identity affected?
Based on the national saving and investment identity, what are the three ways the macroeconomy might react to greater government budget deficits?
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