1. For Canada, the demand pressures generated by the U.S. tax cut and the spillover effects of increased U.S. defense spending will push the Canadian economy further into an excess demand situation.
a. How will the U.S. tax cut and the increased U.S. defense spending influence the U.S. economy?
b. What name do economists give to this kind of government action?
c. How would this effect influence the Canadian economy?
2. GDP grew at a much faster 4.8 percent rate in the October-December quarter, but analysts said that growth masked some dangerous imbalances that were not present in the first-quarter report. Almost all of the fourth-quarter increase in GDP wound up as unsold inventory sitting on shelves.
a. If it doesn't get sold, how could it get counted into GDP?
b. Why is this phenomenon described as a "dangerous imbalance"?
3. Budget deficits are sometimes useful to spur consumption and thus encourage investment in business plant and equipment, but more generally they discourage rather than encourage investment because...
a. Explain how budget deficits could spur consumption and encourage investment.
b. Complete this clipping.