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Why do tax cuts and increased government spending result in a rise in interest rate?
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How can government spending trigger a chain of events that helps to improve the economy?
This theory comes from John Maynard Keynes's theories on the economy. High government spending (AKA running a budget deficit) means that there is an increased demand in the market for business output, which will result in increased employment, which will result in higher incomes, which will result in increased consumer spending, which well then result in even more demand. This practice is theoretically most useful to bring an economy out of a recession and reverse high unemployment.
What is the connection between an increase in government purchases and the trade deficit?
This is a question of the crowding effect of government spending. When the government increases purchases, it will increase the GDP by a multiplier effect, i.e., the change in GDP is the change in G times 1/(1-MPC). In an IS-LM model, the increased GDP will raise the interest rate and discourage the private investment. Such a "crowding out" effect will reduce the GDP increase. On the other hand, the increased interest rate will raise the international demand for domestic currency and, in turn, increase the exchange rate. A higher exchange rate makes the domestic products more expensive and foreign goods cheaper. Therefore, the export will be lowered while the import will be increased. As a result, the trade deficit will be enlarged.
How can the government encourage more spending?
Firstly, the Aggregate Demand consists of [ C + I + G +(X-M) ]. Government spending being one of the component of AD will affect the GDP. In this case, higher AD will boost the national income by a multiple amount through the multiplier effect.Next, government spending can be in the form of education, training, subsidies etc. This definitely will benefit the society in terms of lower price (Subsidies), able to fetch higher factor income in future (Education), increased productivity (Training) and much more! In a nutshell, the initial increase in G will in turn result in increased C , I and even X!
Does reducing government spending improve or exacerbate an ailing economy?
It may temporarily improve the government's bottom line, but because government spending is such a large part of a country's economy, the net result is a drastic negative impact on the economy where entire industries (such a defense contractors) may cease to exist.
What was the result of the investigative journalism that uncovered corruption and scandal in business and government?
newspaper circulation increased but little else happened
How can government spending trigger a chain of events that helps to improve the economy?
This theory comes from John Maynard Keynes's theories on the economy. High government spending (AKA running a budget deficit) means that there is an increased demand in the market for business output, which will result in increased employment, which will result in higher incomes, which will result in increased consumer spending, which well then result in even more demand. This practice is theoretically most useful to bring an economy out of a recession and reverse high unemployment.
Which diagram shows how the role of government changed as a result of the New Deal?
The areas of government responsibility increased. -> Government spending increased.
What level of government greatly increased as a result of the New Deal?
the animal
What is the connection between an increase in government purchases and the trade deficit?
This is a question of the crowding effect of government spending. When the government increases purchases, it will increase the GDP by a multiplier effect, i.e., the change in GDP is the change in G times 1/(1-MPC). In an IS-LM model, the increased GDP will raise the interest rate and discourage the private investment. Such a "crowding out" effect will reduce the GDP increase. On the other hand, the increased interest rate will raise the international demand for domestic currency and, in turn, increase the exchange rate. A higher exchange rate makes the domestic products more expensive and foreign goods cheaper. Therefore, the export will be lowered while the import will be increased. As a result, the trade deficit will be enlarged.
What is the most likely result of an increase in interest ratesĀ a. investment spending risesĀ b. investment spending fallsĀ c. the economy speeds upĀ d. unemployment falls?
b. investment spending falls
What was on result of the manchurian?
It greatly increased power of the Japanese army over the government
How can the government encourage more spending?
Firstly, the Aggregate Demand consists of [ C + I + G +(X-M) ]. Government spending being one of the component of AD will affect the GDP. In this case, higher AD will boost the national income by a multiple amount through the multiplier effect.Next, government spending can be in the form of education, training, subsidies etc. This definitely will benefit the society in terms of lower price (Subsidies), able to fetch higher factor income in future (Education), increased productivity (Training) and much more! In a nutshell, the initial increase in G will in turn result in increased C , I and even X!
What was the result of the manchurian incident?
It greatly increased power of the Japanese army over the government
What happened to the federal government in the US as a result of World War 1?
The scope of its power increased.
What was one result of the Manchurian Incident?
It greatly increased power of the Japanese army over the government
What type of government spending is often the result of fiscal policy?
All government spending is ultimately the result of fiscal policy. Fiscal policy is another way of saying "how government spends money it raises through taxation to influence the economy". A government that believes it should not play a large part in driving economic demand through spending (a 'tight' fiscal policy) would typically raise and spend less than a government pursuing a 'loose' fiscal policy. If you count basic state expenditure on social security and healthcare as being non-negotiable then you might typically see a government engaged in discretionary spending such as large infrastructure projects as a result of fiscal policy (i.e. to directly employ the unemployed as workers and boost the economy). These kinds of discretionary spending most often result from fiscal policy. You may also want to explore the related links.
Does reducing government spending improve or exacerbate an ailing economy?
It may temporarily improve the government's bottom line, but because government spending is such a large part of a country's economy, the net result is a drastic negative impact on the economy where entire industries (such a defense contractors) may cease to exist.
