Question 1

Some have argued in favor of reducing taxes on repatriated earnings that companies operating in the United States have made in other countries.Such a tax break could lead to a sharp increase in the amount of repatriated earnings and raise tax revenues.If such an increase were temporary,what would be the effect on the real budget deficit for the current year? What would be the effect on the structural deficit? Explain.

Accepted Answer

The answer of Some have argued in favor of reducing...

Question 2

Suppose the economy is in a recession and that revenues for the current year are equal to expenditures.
(a)What is the budget deficit in this case?
(b)How would a cyclically adjusted budget deficit be different? Explain.

Accepted Answer

The answer of Suppose the economy is in a recession...

Question 3

Suppose that a state legislature votes to increase spending because of an unexpected recession.This is an example of which of the following?

Accepted Answer

Discretionary stabilization refers to a deliberate government action to stabilize the economy. In this scenario, the state legislature is making a decision to increase spending with the goal of countering the effects of an unexpected recession, which means they are taking discretionary action to stabilize the economy. Dynamic scoring of a policy refers to a method of analyzing the economic effects of a proposed policy, and is not relevant to this scenario. Capital accounting refers to the process of recording and reporting the financial assets and liabilities of a business or government, and is also not relevant to this scenario. Automatic stabilization refers to built-in mechanisms in the economy that automatically work to stabilize it, such as changes in incomes, tax revenues, and government spending that occur automatically in response to economic activity. While government spending can be part of automatic stabilization, the fact that the state legislature is making a deliberate decision to increase spending means this is not an example of automatic stabilization.

Question 4

Compare and contrast static scoring of the budget with dynamic scoring when it comes to evaluating the effect of a policy change.

Accepted Answer

The answer of Compare and contrast static scoring of the...

Question 5

The difference between the present discounted value (PDV)of projected expenditures each year in the future and the PDV of projected revenues each year in the future is the PDV of the government's:

Accepted Answer

The PDV of the projected expenditures minus the PDV of projected revenues is known as the fiscal imbalance. This imbalance can occur due to a structural deficit (persistent gap between revenues and expenditures over time), generational imbalance (where current expenditures are not being offset by current revenues, burdening future generations), or a cyclically adjusted deficit (takes into account fluctuations in the economy and adjusts for it). However, the question specifically asks about the PDV of the government's imbalance, which is best described as the fiscal imbalance.

Question 6

Suppose that the federal government is considering two alternative spending bills.The first would purchase land for $80 billion to protect an endangered species,while the second would use the $80 billion to build new highways.How would these spending bills affect the cash and capital accounts of the federal government?

Accepted Answer

The answer of Suppose that the federal government is considering...

Question 7

Explain the views of conservatives and liberals regarding the causes of persistent federal budget deficits.

Accepted Answer

The answer of Explain the views of conservatives and liberals...

Question 8

Explain the recent proposals of an explicit balanced budget amendment in relation to PAYGO.What are the views of supporters and opponents of these proposals?

Accepted Answer

The answer of Explain the recent proposals of an explicit...

Quiz 4: Budget Analysis and Deficit Financing

Suppose the economy is in a recession and that revenues for the current year are equal to expenditures. (a)What is the budget deficit in this case? (b)How would a cyclically adjusted budget deficit be different? Explain.

Suppose that a state legislature votes to increase spending because of an unexpected recession.This is an example of which of the following?

Compare and contrast static scoring of the budget with dynamic scoring when it comes to evaluating the effect of a policy change.

The difference between the present discounted value (PDV) of projected expenditures each year in the future and the PDV of projected revenues each year in the future is the PDV of the government's:

Explain the views of conservatives and liberals regarding the causes of persistent federal budget deficits.

Explain the recent proposals of an explicit balanced budget amendment in relation to PAYGO.What are the views of supporters and opponents of these proposals?