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almond37 [142]
3 years ago
11

Choose the correct statement. A. Most economists believe that the​ Ricardo-Barro effect holds in the loanable funds market. B. A

ccording to the​ Ricardo-Barro effect, rational taxpayers know that a budget deficit today means that future taxes will be higher and future disposable incomes will be smaller. C. According to the​ Ricardo-Barro effect, a government budget deficit leads to the​ crowding-out effect. D. According to the​ Ricardo-Barro effect, a budget deficit raises the real interest rate.
Social Studies
1 answer:
Marizza181 [45]3 years ago
6 0

Answer:

The correct answer and the letter b. According to the​ Ricardo-Barro effect, rational taxpayers know that a budget deficit today means that future taxes will be higher and future disposable incomes will be smaller.

Explanation:

The Ricardo-Barro effect, also called Ricardian equivalence, stresses that budget deficits are not financed by public debt or taxes do not affect consumption because they decrease disposable income. The Ricardo-Barro effect is on tax equivalence and public debt, that is, it shows that if the government incurs a public deficit, rational agents will realize that in the future it will be necessary to raise taxes or issue public bonds to finance the public deficit. In this way, rational agents will save to pay the future taxes needed to control the deficit, which will lead to lower disposable income.

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The Norman invasion in the year 1066 is considered to be very significant because it changed England in many ways. This linked England even more with the continent of Europe. It created one of the most strong monarchies in Europe and resulted in the impact and hold of Scandinavian to weaken a lot. This invasion changed the English traditions and language and there were some influence of language of France and it's culture.

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2 years ago
For each situation, give an example of a fiscal policy and a monetary policy solution. (p. 15)
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Answer:

Monetary Policy refers to the use of money supply and interest rates by the Central bank of a country to help achieve Economic goals such as inflation, consumption and economic growth. An expansionary monetary policy increases money supply and a contractionary policy decreases it.

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<u>1. Rapid investment during a boom period threatens to overheat the economy. </u>

Fiscal policy solution:  Contractionary Fiscal Policy

The Economy might overheat because of a high amount of investment in production. This means that Aggregate Demand is moving too fast. To rein this in with Fiscal Policy, the Government can increase taxes and reduce spending. This way people have less money to save to be used for investment and companies have less money to do the same.

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The Central bank should reduce money supply and increase interest rates. They can do this by increasing the reserve requirement rate for banks and engage in Open Market Operations to sell securities to the public. This reduction in money supply will increase interest rates thereby reducing the amount of money left for investing.

2. Layoffs lead to an economic slowdown.

Fiscal policy solution:  Expansionary Fiscal Policy

The goal here is to stimulate the economy so that employers can hire more people. The Government can increase spending which would lead to a multiplier effect in income. They should also reduce taxes so that the people can have more money after paying taxes. These two things will have the effect of increasing investment spending which will enable companies to embark on new projects that will increase employment.

Monetary policy solution: Expansionary Monetary Policy

The Central bank should also aim to increase interest rates and money supply at least in the short run. By decreasing the Discount rate as well as the Reserve requirement, and embarking on Open Market Operations where they buy securities from the public, they can increase money supply. This increase in money supply will mean that there is excess money for investment which will lead to increased employment.

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Answer:

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