1. What impact would an increase in the nation's money supply or the federal government's budget deficit have on the real GDP and price level in the macroeconomy? What phase of the business cycle might this create?
2. What impact would a dramatic increase in the world price of oil have on the national economy?
3. According to Keynesians, when should the federal government run a deficit and when should it run a surplus?
4. How could a greater budget deficit increase the trade deficit?
5. What happens to the multiplier if there is an increase in the marginal propensity to consume?
6. What would likely happen to the level of economic activity if the government took the necessary steps to reduce the deficit significantly in a relatively short period of time?
7. When is the most appropriate time to reduce the deficit?
1. What impact would an increase in the nation's money supply or the federal government's budget deficit have on the real GDP and price level in the macroeconomy? What phase of the business cycle might this create?
2. What impact would a dramatic increase in the world price of oil have on the national economy?
3. According to Keynesians, when should the federal government run a deficit and when should it run a surplus?
4. How could a greater budget deficit increase the trade deficit?
5. What happens to the multiplier if there is an increase in the marginal propensity to consume?
6. What would likely happen to the level of economic activity if the government took the necessary steps to reduce the deficit significantly in a relatively short period of time?
7. When is the most appropriate time to reduce the deficit?
Related textbook solutions
Related questions
You hear on the nightly news that the president has vowed to decrease the nation's debt. Both the government and private citizens will have to buckle down and learn to do without, he says.
In order to reduce its debt, a nation must:
| A. | run lower deficits. |
| B. | decrease tax rates. |
| C. | run lower surpluses. |
| D. | increase in government spending. |
Debt reduction will result in:
| A. | more public works projects, higher transfer payments, and more money available for households to spend. |
| B. | fewer public works projects, higher transfer payments, and more money available for households to spend. |
| C. | more public works projects, lower transfer payments, and less money available for households to spend. |
| D. | fewer public works projects, lower transfer payments, and less money available for households to spend. |
A friend of yours looks at the state of the U.S. debt in 2011 and tells you, Since the debt is so high, we must be running an incredibly large deficit every year. Your friend's analysis is:
| A. | not valid, because the debt is always changing even when deficits are the same. |
| B. | not valid, because the debt can be high even when the deficit for an individual year is small. |
| C. | valid, because the debt is always changing even when deficits are the same. |
| D. | valid, because the public debt is the sum of all deficits and surpluses run by the government over time and can be high even when the deficit for an individual year is small. |
Assume that the government in some nations intended to respond to low employment via fiscal policy.
a. What type of policy would this require?
| A. | A contractionary fiscal policy designed to decrease the aggregate demand curve. |
| B. | An expansionary fiscal policy designed to decrease the aggregate demand curve. |
| C. | An expansionary fiscal policy designed to increase the aggregate demand curve. |
| D. | A contractionary fiscal policy designed to increase the aggregate demand curve. |
b. Assume that this policy ended up having an undesirable outcome. How could this happen in terms of formulation and implementation lags?
| A. | This could happen if the implementation lag exceeded the formulation lag. |
| B. | This could happen if the formulation lag exceeded the implementation lag. |
| C. | This could happen if the formulation lag and the implementation lag exceeded the expansion. |
| D. | This could happen if the formulation lag and the implementation lag exceeded the recession. |
Econo Nation started 2008 with no national budget debt or surplus. By the end of 2008, it had a budget surplus of $286 million; in 2009, it had a budget deficit of $-425 million; in 2010, it had a budget surplus of $100 million, and the amount of its budget deficit or surplus in 2011 is unknown. If at the end of 2011 Econo Nation's national debt totalled $52 million, determine the deficit or surplus in 2011.
Instructions: Enter your answer as a whole number and include a negative sign if there is a deficit.
| Period | Deficit (-) or surplus (+) |
| Beginning of 2008 | $0 |
| End of 2008 | $286 million |
| 2009 | $-425 million |
| 2010 | $100 million |
| End of 2011 | _______ million |
