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Questions tagged [fiscal-policy]

the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.

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INTERMEDIATE MACROECONOMIC THEORY- Fiscal Policy in the Long-Run (Classical) Closed Economy

Question 2: Fiscal Policy in the Long-Run (Classical) Closed Economy (58 marks) Consider the following Long-Run Closed Economy Model Natural Rate of Output: $Y = 11,851$ Total Demand: $YAD = C + I + G$...
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How do Fiscal and Monetary policy interact intuitively?

Suppose there is a recession, and the government aims to provide a fiscal stimulus. Assuming an independent CB, the government will issue treasury bills to borrow and finance the stimulus. Consider ...
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How to model discontinuities in sovereign debt interest rates?

For some emerging economies, the interest rates on sovereign debt are sometimes highly volatile: undergoing periods of stability then sharp upward/downward jumps. In continuous-time models, however, ...
cel's user avatar
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Is there any way retirement systems can cope with declining population?

Data show that population in developed countries will start declining by end of this century. Because this is due to low birth rates and aging this will lead to very large imbalance between ...
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The equation for ad valorem or value tax is given by (1 + τ ) p1x1 + p2x2 = m. Does this imply that higher the p1 higher the tax?

In other words, do luxury goods get taxed more while cheaper goods are taxed less in the case of value tax? Any insight would be appreciated. Thank you!
Amit Daultani's user avatar
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Interest rates vs consumption tax brackets

I know only a little bit about economics, but I have been puzzled why interest rates should be used to combat inflation where direct solutions exist. I have some trouble understanding why interest ...
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What would be the theoretical outcome of expansionary fiscal policy... on the business cycle?

Hello all, So, I came across this question on my economics final. It immediately struck me as odd. It's asking what effect expansionary fiscal policy would have in the Aggregate Demand - Aggregate ...
Haythem19's user avatar
2 votes
3 answers
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How can good outcomes, and not just trade-offs, be achieved through economic policy?

I realise this is a very broad question, and my economic knowledge amounts to 1 year of high school, but it seems as though every economic policy causes trade-offs, and none actually solve issues. As ...
Iron filings's user avatar
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Relation between High government debt to GDP ratio, financial stability of a country and repricing effect on balance sheet of banks

Was reading an editorial in which author wrote following:- I understood it as follows: India having High Debt/GDP(around 84%), means Foreign portfolio investors(FPIs) will have less confidence to ...
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calculation of general government debt from reserve bank of India's annual report

As per Reserve Bank of India's report, The general government deficit and debt moderated to 9.4 per cent and 86.5 per cent of GDP, respectively, in 2022-23 (BE) from the peak levels of 13.1 per cent ...
lumber jack's user avatar
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Question about how NPV was used in this 2010 Obama proposal

I'm looking at a 2010 Obama proposal to allow 100% expensing (i.e. allowing a capital good to 100% depreciate in the first year to allow it as a tax expense). Here's the proposal: https://...
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stochastic optimal control/FOC/Reis(2021)

Reis (2021) `The constraint on public debt when $r < g$ but $g < m$' : HJB: $$\rho V(a, q) = \max_{c/a, k/a} [\log c + V'(a,q)[r + (mq-r)\frac{k}{a} - \frac{c}{a}] a + \frac{V''(a,q)}{2} (k/a)^2 ...
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1 answer
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Crowding out effect: "High income leads to higher money demand"

I am currently looking through Mankiw "Economics" (5th edtion). I have come across this statement on page 664. When talking about lowering taxes to stimulate the economy [lowering taxes, ...
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UK gilt yield melt up - fiscal dominance - preferences versus constraints

In 1962, Milton Friedman dismissed the notion of "central bank independence" as a polite fiction, saying "it would not survive the first real conflict with government." Since then, ...
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Set of implementable allocations (Overlapping Generations Models)

My question is from overlapping generations $\Rightarrow$ I want to prove this part of the theorem $\textbf{First}$ proceed by showing that the allocations in a competitive equilibrium must satisfy(...
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What is meant by "expansionary fiscal policy" and "tight monetary policy" in G. Soros' statement in his book The Alchemy of Finance?

I came across the following idea from George Soros' book The Alchemy of Finance which is also discussed in the book The New Market Wizards (by Jack D. Schwager) during the latter's interview of S. ...
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In 'corrupt' countries, what proportion of government funds get spent on what they are allocated?

Are there any estimates across countries of the proportion of funds that actually get spent on what they're allocated to be spent on?1 Most OECD countries would probably have ratios close to 1:1, that ...
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Monetary and fiscal policies: problem and solution approach

Can the community recommend resources about macroeconomics / public finance that (roughly) follow the following design: Here's a macroeconomics / public finance economic problem (description, ...
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Why there's a large difference between fiscal deficit and debt to GDP ratio of a country?

The fiscal deficit is the gap between expenses and earnings. For the fiscal year 2020-21, India's debt to GDP ratio was 59.3%; and the fiscal deficit was 9.2% of GDP. How come debt is larger than the ...
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Is it any more harmful for the government to mandate a wage increase?

Generally speaking, is it any more advantageous/disadvantageous for the government to mandate a wage increase than for companies to increase wages based on the supply of labor?
StackExchange7's user avatar
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Sources for information about Danish general government finances since 2000 (in English)

for a report I have to write about Danish public finances and fiscal policy (budget balance, debt, revenues, expenditures) I'd like detailed information dating back to 2000 or publications giving an ...
Nasan's user avatar
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1 answer
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Large National Debt by borrowing money from foreign sources

I have a question about the greater severity of large national debt caused by borrowing from foreign sources. I am reading a book about elementary Economics and am currently on a chapter discussing ...
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The link between economic growth, inflation, interest rates and fiscal deficit

I want to ask a question about how economic growth, inflation, interest rates is linked to fiscal deficit. I was reading a book on introductory economics and the following passage came up: If a ...
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0 answers
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Controversy surrounding the Fiscal Theory of the Price Level (FTPL)

I recently started reading a draft of John Cochrane's book on the Fiscal Theory of the Price Level. In the preface he states that the "[...] theoretical controversies are over." However, ...
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How was sulphuric acid used to back money?

I remember reading in a economics and history book that sulphuric acid production was used as an alternative to gold standard as the basis of the value of currency due to it’s importance in making ...
Evamentality's user avatar
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non strategic sovereign default

Much of the sovereign default literature (e.g., Arellano (2008), Bulow and Rogoff (1989)), considers that sovereign default is strategic: i.e., defaults occurs if the current benefits outweigh ...
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Loosely speaking, are all modern economies 'Keynesian' in their stance on spending during downturns?

Keynesian economics is defined as: increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression. Do all modern economies adopt a Keynesian ...
stevec's user avatar
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2 votes
2 answers
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What would monetarists do when interest rates approach zero and become ineffective?

So monetarist economists such as Milton Friedman focus on managing the money supply and lower interest rates as a solution to economic downturn. But what would they do in a recession as the interest ...
CountDOOKU's user avatar
1 vote
1 answer
42 views

Where to find information to establish causation between economic policies and economic data?

I've merely taken a few economic courses in college -not an economics major-, so my knowledge regarding the field is limited. Lately I've been interested in learning about the economic impact of ...
Sam's user avatar
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4 votes
1 answer
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Why did John Keynes believe that monetary policy to be less effective than fiscal policy?

So why did John Keynes believe that monetary policy to be less effective than fiscal policy for stabilising the level of economic activity, particularly in a recession? Lowering markets' interest rate ...
CountDOOKU's user avatar
3 votes
2 answers
86 views

Monetary policy rate and fiscal deficit

A colleague in work mentioned today that Chile is keeping a flat monetary policy rate given "there is a higher expected fiscal deficit". If there is an expected fiscal deficit (i.e., ...
SheilaZen29's user avatar
1 vote
1 answer
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Can someone please explain how personal savings and fiscal deficit are related in this context? [closed]

The lines which i have highlighted is what I want to be explained to me. This is with reference to indian economy
Aryan Jain's user avatar
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2 answers
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Macroeconomics differences of 2008 financial crisis and 2020 economic crisis

How is 2020 financial crisis different from 2008 financial crisis? For example, why have stock market indices (e.g. S&P500, NASDAQ-100) recovered so quickly (about 3 months instead of longer than ...
Daniel's user avatar
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How to calculate fiscal space for a country?

I would greatly appreciate if you could explain me how to calculate fiscal space for an specific country. Or, could you please introduce me some references which explain it's calculation step by step ...
ebrahimi's user avatar
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1 answer
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The government does not need to gather capital via tax and Treasuries to spend? According to MMT

I have watched Warren Moslers interview. https://www.youtube.com/watch?v=W97s3zbFKvc&t=841s. At 7:26 he says that the Treasury does not issue securities for the purpose of financing spending (it ...
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1 answer
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How can autonomous private spending change budget surplus?

I was reading Keynesian economics in R.Dornbusch's book where he mentioned the defects of using budget surplus as a measure where he says it can be changed and effected by autonomous private spending ...
Veb's user avatar
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1 vote
2 answers
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Difference type of crowding out effect in economics

In macroeconomics I came across two type of crowding out. First, in IS LM model where in classical case, when LM curve is vertical increase in government expenditures have no increase in output i.e. ...
akshit arora's user avatar
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1 answer
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What does it mean by Global recession?

I am bit curious to understand what it actually means when I read global recession is coming soon. There are some questions which pop in my mind reading such news. Some of them are: What causes ...
Mohit Sharma's user avatar
1 vote
1 answer
242 views

Does higher tax on luxury goods does more harm than benefit?

I was studying Fiscal policy and I came across measures to reduce income inequality by using fiscal tools. One of the tool mentioned in that was - Higher taxes on luxury goods This makes sense that ...
Varun Singh's user avatar
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Why is Crowding out more effective at full employment?

Now my professor explained to me that at full employment the increase in G (gov expenditure) shifts the IS curve to the right, but at the same time the price level increase from the rightward shift in ...
Robin's user avatar
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which policy (fiscal or monetary) is better to stabilize the cycle?

I am currently studying for a test and the following sentence "In an open economy with high capital mobility, monetary policy is preferable to fiscal policy to stabilize the cycle", the "answer" is ...
Isidora's user avatar
2 votes
1 answer
58 views

How does a govt surplus increases investment?

From the closed economy equilibrium condition $I = S + (T - G)$, how does exactly a surplus (which I assume would be used for paying debt) increases investment in the same amount? I ask that because ...
Antônio Gabriel Zeni Landim's user avatar
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1 answer
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Government deficit

When the economy of a government is facing a deficit, why can't the government just increase the taxes to pay for its expenses? I've read that it should rather borrow money, because increasing the ...
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1 vote
1 answer
26 views

Do changes in fixed taxes have a bigger effect on real GDP compared with government spending because they affect consumption

True or False: Changes in fixed taxes have a bigger effect on real GDP compared with government spending because they affect consumption
Maria's user avatar
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Could the inflation following the Gold Rush have been avoided, are we any "wiser" on inflation now?

Quoting Milton Friedman on the inflationary period shortly following the American Gold Rush in California: "Because there was more gold, they had to pay a little more gold to buy goods and ...
Arash Howaida's user avatar
2 votes
2 answers
783 views

What is the effect of expansionary fiscal policy in case liquidity trap situation?

I've read that liquidity trap means interest rate is at its minimum and increase in real money stock will not lead to fall in interest rate because people will be demanding whatever the amount is ...
Shoaib Ashraf's user avatar
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1 answer
344 views

Fiscal budget: spending in real vs nominal terms

What does it mean in the context of a budget to “freeze spending in real terms”? And how would this differ from freezing spending in “nominal terms”? I am looking to understand how this would be ...
user18115's user avatar
1 vote
1 answer
82 views

Advice for finding literature for thesis

I have to write my bachelor thesis in the coming months and I was planning on replicating one of the leading papers of the last years in the field of macro economics. Problem is that I am ...
confused student's user avatar
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2 answers
103 views

Universal Basic Income [closed]

In 2017 some countries have adopted the Universal Basic Income as an alternative to Welfare Payments, my question is, is it economically feasible by governments?
Surya Shyam's user avatar
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1 answer
500 views

Debt accumulation equation derivation: valid given that it rests on calculus and the time period is a year? (nowhere near infinitesimal?)

Above is an image of what I’m referring to. The top ‘rule of thumb’ is derived using calculus, and hence is only valid for infinitesimal changes in t. However, this equation is considered over the ...
Jayden Watson's user avatar