Why might Congress actually prefer the higher rate of inflation that might result from deficit spending to higher taxes and/or a cut in government spending?
What will be an ideal response?
Raising taxes and/or cutting spending are usually not alternatives favored by policymakers who are elected. On the other hand, inflation can actually benefit a government with large debts. First of all, if the interest on the debts is in fixed nominal rates, an increase in the inflation rate actually reduces the real interest rate the government pays. Also, with higher rates of inflation, the real value of the debts decreases, in a sense, inflation allows the government to partially default on their debts.
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Consider a firm that is competitive in both the product and the resource market. The firm incurs a marginal cost of $5. If the marginal product of an additional worker is 20 units, what is the maximum wage that should be offered to the worker?
What will be an ideal response?
Refer to Table 9-18. Looking at the table above, what is the rate of growth of real average hourly earnings from 2015 to 2016?
A) 7.8% B) 6.25% C) 4% D) -4%
Which of the following has been suggested as reasons for Mexico's slow economic growth?
A) Mexico's long-ruling PRI political party B) Mexico's Spanish colonial background C) Mexico's legal restrictions on the financial sector D) all of the above
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