0
Why would increasing the government budget deficit decrease investment spending?
Wiki User
∙ 11y ago
Aggregate Demand = Consumption (C) + Investment (I) + Government Spending (G) + Exports (X) - Imports (M)
Income = Consumption (C) + Savings (S) + Taxes (T)
Aggregate Demand = GDP = Income
C + S + T = C + I +G + (X - M)
so
I=S+(T-G)+(M-X)
If T is less than G you will have a budget deficit. Which would make (T-G) negative and decrease investment.
Wiki User
∙ 11y ago
Add your answer:
Earn +20 pts
Can fiscal policy be implemented to overcome inflation?
Yes! Increasing taxes and reducing government spending will decrease the money in people's hand.
A decrease in government spending will cause a?
decrease in aggregate demand
Why is it difficult for the federal government to increase or decrease spending?
Because two thirds of all government spending is on entitlements which the government connot easily alter. (by Solomon Zelman)
Which action has an expansionary effect on the economy?
Increasing government spending
What are four types of spending that represent the AD curve?
Consumption, Investment, Government spending, and Net Taxes
How is fiscal policy controlled?
Taxes, and government spending. Increasing taxes will decrease consumption and supply. Lowering taxes will increase consumption and supply. Increasing government spending will increase national consumption, and decreasing government spending will decrease national consumption. The economics AD-AS model shows a visual representation of the effects of fiscal policy on the economy if you are further interested.
Do Keynesian economist believe that the economy is self regulating?
No, they regulate the economy by doing 2 things: 1)increasing government spending and decrease taxes to fight recession 2) decrease government spending and increase taxes to fight inflation.
Can fiscal policy be implemented to overcome inflation?
Yes! Increasing taxes and reducing government spending will decrease the money in people's hand.
A decrease in government spending will cause a?
decrease in aggregate demand
Why is it difficult for the federal government to increase or decrease spending?
Because two thirds of all government spending is on entitlements which the government connot easily alter. (by Solomon Zelman)
The component of the US GDP are?
I'll give you the expenditure approach Consumption- share of GDP from consumer spending Investment-share from firm investment Government Spending-share of government spending Net Exports (exports-Imports)
How can recent government spending be best described?
Constantly increasing
Which action has an expansionary effect on the economy?
Increasing government spending
What are four types of spending that represent the AD curve?
Consumption, Investment, Government spending, and Net Taxes
Keynes emphasized that income was determined by which of these?
consumption, investment, and government spending
Keynes emphasized that income was determined by what?
Comsumption, investment and government spending
When would the government most likely decrease its spending?
. When unemployment has decreased
