Q: Consider the intertemporal budget constraint in equation (18.5).
Consider the intertemporal budget constraint in equation (18.5). Assume the interest rate is i = 5%. (a) Suppose the government cuts taxes today by $100 billion. Describe three possible ways the gover...
See AnswerQ: The debt- GDP ratio in Belgium exceeded 120% in the
The debt- GDP ratio in Belgium exceeded 120% in the early 1990s and has fallen to just over 80% more recently. Italy had a debt- GDP ratio of about 100% even before the euro crisis. The rapid rise in...
See AnswerQ: Suppose the government decides to reduce taxes today by 1% of
Suppose the government decides to reduce taxes today by 1% of GDP, financed by higher borrowing, with the borrowing to be repaid 10 years from now with higher taxes. Discuss the various arguments abou...
See AnswerQ: (a) What is this problem? Is it limited to
(a) What is this problem? Is it limited to the United States? (b) To what extent is this fiscal problem driven by the Social Security program? By how much would taxes have to rise as a share of GDP in...
See AnswerQ: China currently shows a high investment rate as well as a trade
China currently shows a high investment rate as well as a trade surplus. In what sense is there a tension between these two facts? What is odd about China’s situation relative to conventional macroeco...
See AnswerQ: The trade balance data is currently most easily obtained from the World
The trade balance data is currently most easily obtained from the World Bank site: data.worldbank.org. Use that database to analyze graphs of the trade balance as a share of GDP in China and Germany....
See AnswerQ: In the years after World War II, the United States briefly
In the years after World War II, the United States briefly ran a trade surplus that peaked at about 5% of GDP in 1947. Use the national income identity (the investment = savings version) to provide a...
See AnswerQ: Now consider a TFP shock that is permanent. For example,
Now consider a TFP shock that is permanent. For example, suppose the discovery and application of a new technology makes firms more productive. Consider the labor market block of a standard DSGE model...
See AnswerQ: Consider the apple– computer trade example given in Section 19.
Consider the apple– computer trade example given in Section 19.5. Now suppose that because of a new technology, the North becomes even more productive at producing comput...
See AnswerQ: In the same apple– computer trade example given in Section 19
In the same apple– computer trade example given in Section 19.5, suppose that because of technology transfer, the South becomes just as productive as the North at produci...
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