Chapter 13: Q3. (page 500)
Is the depth of a recession a good or a bad time to undertake an energy project? Why or why not?
The recession is a good time to take energy projects as it will increase the economy's aggregate demand.
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Why is the cyclically adjusted budget balance a better measure of whether government policies are sustainable in the long run than the actual budget balance?
In the chapter, we talked about the problem of lags in discretionary fiscal policy. What does the Solana case tell us about this issue?
Explain why a \(500 million reduction in government purchases of goods and services will generate a larger fall in real GDP than a \)500 million reduction in government transfers.
Is the following statement true or false? Explain. “When the government expands, the private sector shrinks; when the government shrinks, the private sector expands.”
In each of the following cases, determine whether the policy is an expansionary or contractionary fiscal policy.
a. Several military bases around the country, which together employ tens of thousands of people, are closed.
b. The number of weeks an unemployed person is eligible for unemployment benefits is increased.
c. The federal tax on gasoline is increased.
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