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Suppose clothing stores anticipate a good fashion season and add substantially to inventories in their stores. What will happen to GDP?
How do countries benefit from growth in their trading partners? The Locomotive Effect: How Foreign Demand Affects a Country s Output.
What evidence does the long historical record provide about multipliers? Using Long-Term Macro Data to Measure Multipliers.
Using your results in part (a), explain how the aggregate demand curve shifts with the increase in exports.
Suppose the MPC is equal to 0.8. Government spending increases by $20 billion. How far does the aggregate demand curve shift to the right?
The rest of the world was growing rapidly during this period. Based on this information, what is the most natural explanation for the growth in U.S. exports?
How much of an increase in investment would be necessary to raise GDP by 200? What would be your answer if this was a closed economy?
What would happen to European equilibrium income? What do you think happened to the volume of world trade during the 1930s?
When your cashier at Walmart records your purchase of a new toaster, it automatically triggers a process to re-order a toaster for the store.
What happens to GDP if taxes and government spending are both decreased by the same amount
Discuss Critics of Keynes pointed out that not all spending is really productive. The Broken Window Fallacy.
Using the government spending multiplier, by how much should government spending be increased? By how much should taxes be decreased?
Assuming this is true, how does this complicate the work of analysts trying to determine the multiplier effects of discretionary spending on GDP?
Discuss Earthquakes and Subsequent GDP Growth. Explain why this happens and whether that means that earthquakes are really good things.
Find what is the average tax rate and the marginal tax rate for someone earning $16,000 and for someone earning $30,000.
Calculate the overall and primary deficits for the central government, the provincial governments, and the combined governments.
Define inflation tax (also called seignorage). How does the government collect this tax, and who pays it?
In what ways is the government debt a potential burden on future generations.
Why do economists suggest that tax rates be kept roughly constant over time, rather than alternating between high and low levels?
Which type of tax rate most directly affects how wealthy a person feels? Which type of tax rate affects the reward for working an extra hour?
Define automatic stabilizer and give an example. What advantage do automatic stabilizers have over other types of taxing and spending policies?
What are the three main ways that fiscal policy affects the macroeconomy? Explain briefly how each channel of policy works.
How is government debt related to the government deficit? What factors contribute to a large change in the debt-GDP ratio?
Explain the difference between the overall government budget deficit, the current deficit, and primary current deficit. Why are three deficit concepts needed?
What are the major components of government outlays? What are the major sources of government revenues?