Assume a country is required by law to balance the budget every year. Suppose aggregate demand falls, causing a recession and a budget deficit. To balance the budget, what would the government need to do with the level of government spending and taxes?
How would these changes in government spending and taxes affect aggregate demand and the economy?
What will be an ideal response?
To balance the budget, the government would need to lower government spending and raise taxes, both of which would decrease aggregate demand, making the recession worse.
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Secured property rights provide individuals with incentive to use the resources they own productively because they realize the gains from this use
Indicate whether the statement is true or false
If a change in the price of a good causes no change in total revenue
a. the demand for the good must be elastic. b. the demand for the good must be inelastic. c. the demand for the good must be unit elastic. d. buyers must not respond very much to a change in price.
A decrease in autonomous investment of $100 million that occurs when the marginal propensity to save (MPS) equals 0.25 will lead to a decrease in real Gross Domestic Product (GDP) of
A. $40 million. B. $400 million. C. $25 mllion. D. $250 million.
The figure above shows supply curves for soft drinks. Suppose the economy is at point a. An increase in the price of a soft drink is shown as a movement from point a to
A) none of the points that are illustrated. B) point b. C) point c. D) point d.