Cut the national budget deficit

Assignment Help Business Economics

Reference no: EM132080645

1. President Duterte administration implements programs to expedite and speed up economic growth. For each, explain qualitatively the impact upon the growth of potential output. If possible, give a quantitative estimate of the increase in the growth of potential output and upon the growth of per capita potential output over the next decade.

a. Cut the national budget deficit (or raise the surplus) by 2% of GDP, increasing the ratio of investment to GDP by the same amount.

b. Decrease defense spending by 1% of GDP at full employment

c. Increase investments in human capital (education and training) by 1% of GDP

2. " During periods of inflation, people use real resources to reduce their holdings of fiat money. Such activities produce a private benefit with no corresponding social gain, which illustrates the social cost of inflation". Explain this quotation and cite example.

3. Do you think President Duterte's intention to reduce the tax (through TRAIN law) might have a displacement effect along with government debt? Thus, if the government were to promise large future take home pay and other benefits to workers, would workers feel richer? Elaborate the implications of this premise.

4. What would Keynesians and new classical macroeconomists predict to be the impacts of each of the following on the course of prices, output and employment?

a. A large tax cut

b. A large cut in interest rate

5. Consider the supply of cellular phones. For each of the following, state the effect on supply:

a. A change in technology that lowers production costs

b. An increase in the price of LCD screens

c. A decrease in the price of cellular phones

d. An increase in consumer incomes

6. Put yourself in the shoes of an economic policy maker. The economy is in equilibrium with Price=100 and Q=3000. You refuse to "accommodate" inflation, that is, you want to keep prices absolutely stable at P=100, no matter what happens to output. You can use monetary and fiscal policies to affect aggregate demand, but you can not affect aggregate supply in the short run. How would you respond to :

a. A surprise increase in investment spending

b. A productivity decline that reduces potential output

RESEARCH WORK

1. What role did the economic policies of various governments play in influencing the international expansion strategies of both Mc Donald's and Wal-Mart?

2. Find statistics on the current direct foreign investment in the country? What are the categories of this investment, and how they have changed in recent years?

3. A common confusion is that between the debt and the deficit. Discuss the following:

a. A budget deficit leads to growing government debt

b. Reducing the deficit does not reduce the government debt

c. Reducing the government debt requires running a budget surplus

d. Even though the government deficit was reduced in the recent years, the government still rose in these years

Directions: All answers should be printed in a HARD COPY attached these test questions in

1. Short bond paper (8.5 x11")

2. Calibri 11- inch font

3. Single space

4. Stapled

Reference no: EM132080645

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