Chapter 31: Problem 15
Explain how cuts in funding for programs such as Head Start might affect the development of human capital in the United States.
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Chapter 31: Problem 15
Explain how cuts in funding for programs such as Head Start might affect the development of human capital in the United States.
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Imagine an economy in which Ricardian equivalence holds. This economy has a budget deficit of \(50,\) a trade deficit of \(20,\) private savings of \(130,\) and investment of \(100 .\) If the budget deficit rises to \(70,\) how are the other terms in the national saving and investment identity affected?
Assume there is no discretionary increase in government spending. Explain how an improving economy will affect the budget balance and, in turn, investment and the trade balance.
Assume an economy has a budget surplus of \(1,000,\) private savings of \(4,000,\) and investment of 5,000 . a. Write out a national saving and investment identity for this economy. b. What will be the balance of trade in this economy? c. If the budget surplus changes to a budget deficit of 1000 , with private saving and investment unchanged, what is the new balance of trade in this economy?
What are some of the ways fiscal policy might encourage economic growth?
Under what conditions will a larger budget deficit cause a trade deficit?
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