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In earlier chapters, we've seen that government can increase GDP in short run by running a budget deficit. What are some long-term effects of deficit spending?
Why are the Social Security and Medicare programs headed for trouble? When will the trouble begin? What possible solutions have been proposed?
How is the U.S. budget deficit related to the trade deficit? Why did the federal budget go from a huge deficit in 1992 to a surplus in 1998?
Suppose that budget deficits are financed to a considerable extent by foreigners. How does this create a potential burden on future generations of Americans?
(Crowding Out) How might federal deficits crowd out private domestic investment? How could this crowding out affect future living standards?
Is it possible for U.S. federal budget deficits to crowd out investment spending. How could German or British investment be hurt by large U.S. budget deficits?
What problems would you expect if the country were to employ this kind of budgetary philosophy?
Given the cyclical nature of government tax revenues and spending, how would the resulting budget deficit or surplus vary over the business cycle?
Explain the differences among an annually balanced budget, a cyclically balanced budget, and functional finance. How does each affect economic fluctuations?
Explain why Robert Barro argues that if parents are concerned about future welfare of their children effects of deficit spending on economy will be neutralized.
Why is universal acceptability such important characteristic of money? What other characteristics can you think of that might important to market participants?
(Functions of Money) What are the three important functions of money? Define each of them.
(Spending Multiplier) If the MPC is 0.8, the MPM is 0.1, and the proportional income tax rate is 0.2, what is the value of the spending multiplier?
Analyze what is the level of real GDP demanded? What is the size of net exports at the level of real GDP demanded?
Describe the equilibrium point and price level. Illustrate how fiscal policy can create an expansionary gap of $0.5 trillion.
Identify the equilibrium point and price level. Illustrate how fiscal policy can close the expansionary gap.
Identify the equilibrium point and price level. Illustrate how fiscal policy can close the contractionary gap.
Illustrate the effect of a decrease in autonomous net taxes of $200 billion when the marginal propensity to consume is 0.75.
Illustrate the effect of an increase in government purchases of $200 billion when the marginal propensity to consume is 0.75.
Review the latest column to determine what fiscal policy proposals are under consideration. Are they designed to affect aggregate demand or aggregate supply?
(Banks Are Financial Intermediaries) In acting as financial intermediaries, what needs and desires of savers and borrowers must banks consider?
(Case Study: Faking It) Why did the U.S. government consider it important to redesign the $100 note in order to combat the effects of the supernote?
What portion of U.S. Federal Reserve notes circulate outside the United States? How does this affect the United States?
Take a look at these sources-you can find them on the Money and Credit Markets pages-and determine the extent to which all these interest rates move together.
Consider the numerous bank mergers of the early 2000s. Are bank mergers a good thing? What are the authors' conclusions about this?