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Questions tagged [government-spending]

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What happens if there is increased government deficit spending but not increased money supply?

What happens to real GDP if the government deficit spending is increased, but the Federal Reserve doesn't expand the money supply? Would the effect on real GDP be the same as if the Federal Reserve ...
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Military expenditure over time

The following graph from the world bank website shows the world wide military expenditure in percentage of the world GDP over time from 1988 to 2015 I am trying to find similar data over a much ...
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How does government spending on imported goods affect GDP?

How does government spending on imported goods affect GDP? Is it first counted as government spending and then subtracted as imports? For instance, if the US government buy a new accounting system ...
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Does immigration help to sustain welfare in rich European countries?

There is a lot of discussions about immigration and its effect on economies lately in Europe, so I'd like to ask a question. Is it true that immigration helps to sustain welfare in rich European ...
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Why does capital initially reduce and then rise with an anticipated future decrease in taxes in the RCK model?

Consider the version of the RCK model where there is a government that runs a constant balanced budget. At $t_0$, the economy is in steady state, with constant tax $T_{old} > 0$ Then, at $...
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Are principal payments on government bonds included in normal budget spending?

If I look, for example, at the UK government's Autumn 2017 budget document the spending piechart has a wedge which says 'net debt interest £41bn'. I notice the wording says 'interest' and not ...
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Where does the money go when a city government saves on cost?

How would one go about determining when a city government saves money by lowering their cost of product or service procurement, where does that money go? Specifically, how might one establish how much ...
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Do countries have to run on deficits? What is their possible economic future?

Do countries have to run on deficits? Is their future to behave and act like big companies that produce goods and services?
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Calculating equilibrium income of a three sector model

I need your help ....suppose the economy is like this... Transfer payment is 100 000, Investment 10 000 000 Government expenditure 50 000 000,MPt 0.3,MPC 0.9 Compute the equilibrium income
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Can a spending freeze solve the problem of the Italian enormous government debt?

In view of the upcoming Italian general election, I've been reading the program of a party (please let me know in the comments whether I can/should mention its name), and in a section of it they ...
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How do social impact bonds work? (pay-for-success financing models)

I'm asking because of this news article in particular. To the best of my knowledge investing in high quality early education has one of the highest return of investment (ROI) ratios for governments, ...
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Impact on interest rates of massive government spending

At the last State of the Union address, the President of the United States has reaffirmed his intentions to undertake a massive 1.5 trillion dollar infrastructure spending project over the coming ...
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Consolidated budget constraint

This is an excerpt from a data source that I am using. According to the authors it has been created from accounting identities such that it matches theoretical variables used in macroeconomics. For ...
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How is reducing government expenditure supposed to reduce aggregate demand?

In my coursebook it says that in a deflationary fiscal policy governments may reduce government expenditure (such as building hospitals and road constructions) to reduce aggregate demand but I don't ...
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Government spending dynamics

I am currently reading Woodford (2010) and I have understood it for the most part. However, as I am new to solving these kind of models I have a question regarding a specific type of monetary policy ...
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1answer
259 views

Why can we finance government deficit by having a trade deficit?

I encountered an example question regarding government deficit as follows: $G-T=(S-I)-(X-M)$ where $G$ is government spending, $T$ is net tax (tax minus transfer payment), $S$ is total private ...
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Why did the Greek-bailouts 'Fail' vs Portuguese' Succeed?

Greece has required several bail-outs and is on the brink of falling back into recession. The Portugese economy has seemingly recovered. Why has recovery gone so well in Portugal but failed ...
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1929 stock market crash and unemployment rate

Thomas Sowell has repeatedly made the case that government intervention is largely responsible for the Great Depression. For example, he notes what happened with the unemployment rate in the months ...
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Causes of recent UK Deficit

In 2008 the UK deficit was around £10Bn - in 2010 it had reached around £100Bn. I realise this was due to the "global recession" but exactly why did the deficit grow so much? My understanding is the ...
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How much does a public sector pay rise actually cost the UK government?

This is something that's in the UK news at the moment. Public sector workers have experienced a 1% annual cap on pay increase since 2013. Government ministers are appearing on TV saying that they don'...
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Tax by inflation

I am interested in a system where the state prints new money to cover all its expenses. (There is no direct tax collection.) I'm interested in anything you might have to say about this system, but to ...
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Why do we model that higher government involvement increases output?

I have just read about the "real intertemporal" model of a macroeconomy in Macroeconomics by Stephen Williamson. I am concerned about how it says any increase in government spending, even if it is ...
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What are the main long-standing Keynesian economic programmes in Western nations?

Much of US military spending is more easily rationalised as a job-creating programme than a form of defence, e.g. vehicles Congress funds despite Pentagon insisting it doesn't need or want them or ...
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How much does a person donate to charity unintentionally

I am wondering if it's possible to estimate what percentage of a person's salary ends up in a charity even if that person never donates? I am not an economists and I am not sure if that is a valid ...
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The perception of the effects of government spending within the political world

Econ 101 teaches that government spending comes with a multiplier effect, yet whenever anyone in an election wishes to raise the size of government by even 0.5%, the right starts screaming the world ...
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How does reducing government spending increase the money supply?

According to the following question, it seems as though cutting back on government spending increases the money supply (the answer is C). The only possible explanation I can think of is that in the ...
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Effect of lower Government spending on Loanable Funds Market

I'm having trouble with understanding what the results would be... Let's suppose the situation where the newly formed government act to cut government spending and, by doing so eliminate the ...