Homework Answers
Answer
Option 2
May create inflation
A budget deficit means government revenue is less than the
government expenditure.
T<G
The lower T and higher G increases AD and increases output level
and price level in the economy which increases employment, but it
may create inflation in the economy.
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An increase in federal budget deficit only occurs when there is a surplus in the balance...
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revellus the government's expenses are greater than its Correct. A federal deficit occurs when a government's...
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1. If an economy has a budget surplus of 400, private savings of 1,200, and investment...
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1. Suppose the federal government observes an increase in gross investment. Examine this event in terms of the aggregate...
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4. 25 points a. How can the Federal Government help to reduce or close the inflationary...
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4) When quantity supplied exceeds quantity demanded,a A) surplus occurs and prices are bid up toward...
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6. Monetizing the deficit One of the major objections to government budget deficits is that they may be inflationary. In addition, some worry that the Federal Reserve may monetize part of the deficit by buying some of the newly issued debt, potentially causing even more inflation. In general, a tax cut increases both real GDP and the price level, since it causes aggregate demand to increase. The following graph shows the demand and supply of bank reserves. Show the initial...
revellus the government's expenses are greater than its Correct. A federal deficit occurs when a government's expenses are more than its tax revenues. The government tries to control its deficit either by borrowing or by printing money. See 5-4: Other Factors That Influence Interest Rate Levels the money supply in the market decreases 0/1 pts Incorrect Question 45 Which of the following is true of federal deficit? Other things held constant, the larger the federal deficit, the lower the level...
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