Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 10 Oct 2017 My Price 4.00

balanced budget multiplier

4.  The balanced budget multiplier

 

For both political and macroeconomic reasons, govern- ments are often reluctant to run budget deficits. Here, we exam- ine whether policy changes in G and T that maintain a balanced budget are macroeconomically neutral. Put another way, we examine whether it is possible to affect output through changes in G and T so that the government budget remains balanced.

 

Start from equation (3.8).

 

a.    By how much does Y increase when G increases by one unit?

 

b.   By how much does Y decrease when T increases by one unit?

 

b.   What is the multiplier? Does the economy respond more to changes in autonomous spending when t1 is 0 or when t1 is positive? Explain.

 

c.    Why is fiscal policy in this case called an automatic stabilizer?


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Maurice Tutor
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Status NEW Posted 10 Oct 2017 01:10 PM My Price 4.00

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