Suppose in the country of Miltonia, Ricardian equivalence is 100% true. A- If Miltonian tax rates fall, what happens to spending? Do people spend their tax cuts, save the money, or spend some and save the rest? B- If there is a rise in Miltonian taxes, what happens to spending? Do people start spending less, or do they dissave/borrow more to keep spending at the same rate?

Suppose in the country of Miltonia, Ricardian equivalence is 100% true. A- If Miltonian tax rates fall, what happens to spending? Do people spend their tax cuts, save the money, or spend some and save the rest? B- If there is a rise in Miltonian taxes, what happens to spending? Do people start spending less, or do they dissave/borrow more to keep spending at the same rate?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Six Debates Over Macroeconomic Policy

Section18.5: Should The Government Balance Its Budget?

Problem 5QQ

See similar textbooks

Similar questions

a. In the textbook, you read that Tyler does not save and planaccording to the theory of Ricardian equivalence but Alex is moreof a “Ricardian.” In light of this, who probably cuts back theirspending the most when taxes temporarily rise: someone like Tylerwho is not “Ricardian” or someone like Alex who is?b. If the U.S. government wants to use fiscal policy to shift ADaround easily, which one would the U.S. government prefer tomake more copies of: Tyler or Alex?
Which of the following statementsabout how fiscal policy should mostappropriately be used in a crisis iscorrect? a. If fiscal policy is usedappropriately, a fiscal deficitshould appear duringrecessionary gaps and asurplus during inflationary gaps b. Fiscalpolicy should be used at anyand all points of the cycle toaccelerate growth c. None of these statements iscorrect d. If fiscal policy is usedappropriately, a fiscal surplusshould appear duringrecessionary gaps and a fiscaldeficit during inflationarygaps
posting this again, can you tell me which questions i've gotten wrong? i dont need any explanations for the ones i've gotten right. i just dont know which ones i've missed- if you could explain those that'd be fantastic. thanks 4- Tax cuts in the classical range of the AS will stimulate output and unemployment -false 5- Increasing welfare payments by borrowing money to do so will increase AD- true 6- if the mpc increases, the multiplier decreases- false 7- if the mps increases the multiplier decreases -true 8- part of the cost of growing government budget deficits is and “opportunity cost” of what else could have been done with the money, particularly if the borrowing is used to increase consumption spending. -true 9- tax cuts in the classical range of the AS curve will stimulate output and employment. -true 10- if the AS curve were flat/horizontal an increase in AD would not be inflationary- true 11- an increase in AD might be cause by improving technology in manufacturing processes.…
"The United States has the world'slargest fiscal deficit in total USdollars." Could anything be changedin this statement to correctly evaluatewhether the United States has a fiscaldeficit problem? a. We need to know how large theUS debt is already. b. Deficits should be expressed asa per cent of GDP to correctlyevaluate them. c. All of the information givenhere is necessary to correctlyevaluate whether the UnitedStates has a fiscal deficitproblem. d. We need to know whether thedeficit has occurred during aninflationary gap or arecessionary gap.
Consider the following picture. c' A D B E F Suppose that the government changes government spending: it increases G and decreases G', but leaves T and T' unchanged. The interest rates in the economy are also unchanged. What happens to the budget line of the consumer? O It expands to the right: the consumer will be able to consume more in the present, and less in the future It contracts to the left: the consumer will be able to consume less in the present, and more in the future O It's unchanged O Impossible to tell!
Rea Which of the following is true according to mainstream economics? O Ifa balanced budget amendment to the Constitution were ratified, we should expect the Federal Reserve and Monetary Policy to be less important OIf a balanced budget amendment to the Constitution were ratified, we should expect Fiscal Policy to become more effective three of the answers listed are correčt O Ifa balanced budget amendment to the Constitution were ratified, we should expect worse recessions If a balanced budget amendment to the Constitution were ratified, we should expect milder recessions 05:24 troduction A ENG 8°C O 23-12-2021 P Type here to search SUS prt sc f11 f12 pause break delete insert f9 f10 f8 ロ/京 f3 f4 f5 f6 f7 esc sysrq & backspace 2 3 4 5 6 7 { } Q E Y U P. 86 2T %23
Which of the following is NOT a tool of fiscal policy. O taxes O government spending Onterest rates none of the above Question 2 Assume the economy is in a deep recession. The appropriate fiscal policy response would be to: raise taxes and raise govemment expenditures cut taxes and cut govermment expenditures raise taxes and cut government expenditures O cut taxes and increase government expenditures D Question 3 Crowding out refers to the fact that: Tax cuts will cause inflation O Tax cuts may result in higher interest rates which will "crowd out" business investment spending O increased government spending will crowd out spending on imports none of the above
The graph below shows real GDP levels over time. Answer the following questions based on this groph. Real GDP T Business Cycle Time Y" a. At time T. what is the economy experiencing? O full-employment output an economic expansion an economic contraction b. In order to smooth out the business cycle, what type of fiscal policy should the government undertake? contractionary fiscal policy expansionary fiscal policy c. What type of actions might the government take? a decrease in taxes and an increase in government purchases a decrease in both taxes and govemment purchases an increase in taxes and a decrease in government purchases an increase in both taxes and government purchases
In our construction of the savings and investment model, weconsidered government spending to be immediate spending. In otherwords, there was no “investment” component to government spending.Let’s change up that assumption. Suppose government spending comesin two types: investment spending (new airports, for example) aswell as government consumption (snow plowing, for example). Callthe first GI and the second GCE.
The graph below shows real GDP levels over time. Answer the following questions based on this graph. Real GDP Business Cycle A Time a. At time T, what is the economy experiencing? O an economic expansion O full-employment output O an economic contraction b. In order to smooth out the business cycle, what type of fiscal policy should the government undertake? O expansionary fiscal policy O contractionary fiscal policy c. What type of actions might the government take? O a decrease in taxes and an increase in government purchases O an increase in taxes and a decrease in government purchases O a decrease in both taxes and government purchases. O an increase in both taxes and government purchases
a. In which instance would "crowding out" likely become a concern? OA balanced budget law prevents the government from taking fiscal action during a recession. O Prior-year budget surpluses allow the government to use saved funds to reduce taxes. O In order to increase spending on infrastructure, the federal government decides to borrow funds. b. One result of "crowding out," due to fiscal action, is difficulty saving income for future purchases. O making economic investments. O purchasing stocks and other financial investments.
When the economy is in a recession, the government can use expansionary iscal policy to stimulate and encourage économic growth. Which of the following scenarios represent expansionary fiscal policies from both a supply perspective and a demand perspective? Choose one or more: OA The Federal Reserve increases the money supply and lowers the interest rate while the government simultaneously reduces future taxes. OB. The government lowers tax rates and issues a partial refund of taxes that have already been paid. OC The government raises tax rates and reduces payments of unemployment benefits. OD The government lowers tax rates and undertakes a replacement.of old bridges and roads. Suppose that, during a recession, the government borrows money to provide free wireless Internet access in urban areas. Whichof the following statements are correct? Choose one or more: RA This policy will likely be accompanied by an impact lag as the policy takes time to make its way to the people. O B. The…