Explain whether a policy that results in a larger budget deficit in the current period can lead to a reduction in current output
What will be an ideal response?
In short, yes. If the effects of the higher future interest rates dominate the other effects, current demand could fall causing current Y to fall.
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Refer to the figure above. If the yuan is allowed to float, at exchange rates above E yuan per dollar:
A) the excess supply of dollars in exchange for yuan increases the value of the dollar in the foreign exchange market. B) the excess supply of dollars in exchange for yuan lowers the value of the dollar in the foreign exchange market. C) the excess demand for dollars in exchange for yuan lowers the value of the dollar in the foreign exchange market. D) the excess demand for dollars in exchange for yuan increases the value of the dollar in the foreign exchange market.
Typically, consumers respond to an increase in (expected) future income by ________
A) shifting the budget constraint to the left B) increasing both current and future consumption C) saving more to increase future wealth D) waiting until the income is received before changing their consumption behavior
During a time of an economic downturn, it is likely that projected tax revenues will be __________ than anticipated, and expenditures will be _______ than anticipated.
A. higher; higher B. lower; lower C. lower; higher D. higher; lower
Given a consumer's indifference map, the demand curve for a good can
a. be derived by moving a consumer's budget constraint as her income falls. b. be derived by moving a consumer's budget constraint as her income rises. c. be derived by moving a consumer's budget constraint as the market price of one good changes. d. not be derived from consumer theory.