# Tag Info

## Hot answers tagged government-spending

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What is QE: QE is simply an asset purchase by central bank. As explained by Fed St. Louis QE is defined as: large-scale asset purchases—in the hundreds of billions of dollars range—of, for example, mortgage-backed securities and Treasury securities. Furthermore, under QE this is done with newly created reserves. Generally these assets are actually not ...

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Here is a chart from the OECD, which shows the net fiscal impact of migrants on their recipient country (i.e. by how much to they contribute or withdraw from the welfare state, albeit excluding in-kind benefits such as healthcare). For most Western countries, Denmark included, migrants are modest net positive contributors ("they pay in more than they take ...

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Greece had more debt, less growth and higher budget deficits than Portugal throughout the crisis. As a result, the Greek bailout should have been even bigger, but this was politically untenable, while the Portuguese bailout proved sufficient in size. The lower budget deficits in Portugal, for example, also made it easier to comply with the austerity ...

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Getting the facts straight First before addressing the question, lets get the facts straight as arguing based on incorrect premises is not good and in this case this is also relevant to the answer. In government, the revenue is fixed (most of the time) This is completely incorrect. In fact government revenue varies quite significantly most of the time. ...

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The bottom of these indicator/series pages on FRED always lists the source. In this case, it's the OECD. If you dig around a bit on their site, and find where they host the data, there is always some meta-data attached to these that explains pretty much everything you would be looking for normally. Otherwise, they also list an email and you can ask them ...

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Firstly, the central bank doesn't issue bonds. The treasury (in the executive government) does, as a way to finance government expenditure, and make real investments in the economy. In modern economies, the central bank's primary focus is the interest rate at which they lend money to private banks. If they require more money in order to finance those loans, ...

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Most governments (outside of typically oil-producing nations that have sovereign wealth funds) are net debtors, so public deficits show up as increases in government debt outstanding, and public surpluses (public saving) show up as decreases in debt outstanding. In the model used in Mankiw’s book, the assumption is that government spending never constitutes ...

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The chart you are looking at is off by a year: it should have shown about £10 billion in 2007 and almost £100 billion in 2009. See the ONS figures for the "Public sector current budget deficit, excluding public sector banks" and click on "table" and "year" It is more common to look at "Public sector net borrowing, excluding public sector banks" but the ...

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Unison (2014) - Net cost The Public sector trade union did an analysis of lifting the cap in 2014. The report is here. Unlike the IFS analysis presented above, Unison estimates the net cost of an increase in public pay by 3%, using a microsimulation model. They estimates are summarised in the table below: The key here is that a gross increase in the cost ...

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Aggregate demand is the total domestic demand for goods and services in an economy. Cutting government spending could reduce aggregate two ways. Direct. Government demand is obviously lower, and is a component of domestic demand. Indirect. The recipients of income from government spending have less money to spend. It is theoretically possible that other ...

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To answer the question, I feel it is needed to correct one misunderstanding first: trade deficit does not mean the government buys imported products more than it sells the exported products. Rather, it means the imported products are more than exported products, which does not indicate whether the products are consumed or invested by the government or the ...

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One caveat to the author you refer to, Thomas Sowell is a staunchly conservative economist, so most arguments you hear from him will stick to the Econ 101 wisdom that government intervention is usually bad, tariffs are always bad (to be fair, it is hard to use them to correct externalities for global "public goods"), etc. Although tariffs probably were not ...

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Just to add some more besides the answers above: Short answer: by influencing interest rate. Explanation: In the post Keynesian literature what has come to be appreciated a lot is that government purchases, backed by increased government debt, increases interest rate. Why? Well, that's in itself an interesting explanation and perhaps should be a separate ...

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This is a "there can be no adequate answer" answer, for periods prior to "imperialism as a world system." (Personally, I'd pick 1880s here, ymmv.) Gross domestic product as a conceptual tool contains a number of assumptions about how economies function which are unsustainable prior to the generalisation of capitalism in the Marxian sense. While it might ...

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Federal reserve, has no limit on how much money they can print. Thus, when central banks buy bonds , new money flows into the system. Also, when federal reserve sells the bond , the money is taken out of the system.

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This question is somewhat political, and runs into the area of “opinion-based,” which this site has to avoid. I am only going to attempt to discuss part of it. There’s some long-running economic debates involved, so I will try to describe the debates. I obviously have my own opinions. One side issue: it is unclear in what sense is an “enormous” debt a “...

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The typical analyses which tend to pretty unambiguously show net positive impact of immigration on the economy (despite the likelihood that some specific labour market segments may experience lower wages, which is a negative for workers in that sector at least in the short run) could differ from analyses of specific undertakings to accommodate large numbers ...

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Somewhat straying from the historical question, but I think it's important to discuss the premise of the question: So, overall, the government doesn't have any real incentive to operate in a cost-effective manner. I don't think this is a fair characterization of government - this certainly could describe officials in power, but many street-level ...

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From debt bought by households, firms and foreign governments, as government always did. This question is based on fundamentally flawed premise that: The primary way for Governments to fund their deficits is by issuing new currency from the central bank against new treasury bonds. No, this is not a primary way for most governments to fund its deficit. This ...

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In Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis, Churchill, Ugur and Yew write Since the late 1970s, the received wisdom has been that government size (measured as the ratio of total government expenditure to gross domestic product (GDP) or government consumption to GDP) is detrimental to economic growth. We ...

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Several things: It is not clear that labor productivity as a share of GDP tracks allocative efficiency. For example, it could rise simply because the returns to capital (capital's share of GDP) are falling, which would most obviously be a consequence of allocative inefficiency through over-investment in capital inputs. There are potentially many other ...

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The expenditure measure of GDP counts final expenditure, i.e. consumption by individuals and government and foreigners (exports) plus all capital formation (i.e. investment), and then subtracts imports since that part of final expenditure is not satisfied by domestic production. The salaries of government employees count as government consumption in the ...

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Your answer hits a lot of points, some theoretical, some practical. Most versions of IS/LM that I am aware of have only one interest rate, and if we want to be strict, cannot be applied to a yield curve. (Is “the” interest rate the short rate set by the central bank, or the market-determined bond yield?) There are standard ways of thinking about this, but I ...

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You could say IS-LM is too simplistic. The fundamental discrete time consumption-based asset pricing equation says that if $r_t$ is the risk-free interest rate at time $t$, we have $$\beta (1+r_t) \frac{u'(C_{t+1})}{u'(C_t)} = 1$$ (I'm dropping the expectation since I will be working with a perfect foresight model later on) where $u$ is the ...

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Recall the definition of GDP that it is the aggregate value of all goods and services produced within the domestic territory. The concept of domestic territory is central here. Only those government expenditures that creates a domestic income is counted in GDP. For instance, if US government gives economic aid to a poor African country it will not be a ...

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The UK figure for debt interest doesn’t include repayment of principal. It is instead covered as part of the ‘Net cash requirement’ - the amount of extra cash that the government needs to raise to finance spending/operations each year. When a bond (or gilt, for the UK) matures, the government will need to finance its repayment. However this is just added ...

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Normally, they aren’t, but there are exceptions. For example. The Japanese Ministry of Finance includes principal repayments in its definition of “debt service” - see budget summary for 2014, page 4. (The inclusion of principal payments in debt service seems to be a convention for external debt: how much foreign currency debt that needs to be paid back can ...

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Based on modern macroeconomic theory a country does not have to run deficits, but often chooses to. From a Macroeconomic perspective, a country runs a deficit when G is greater than T (Government purchases outweighs Tax revenue). This is not limited to the public sector (Government), but private individuals can also run deficits when consumption outweighs ...

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One of the main reasons for the general tendency to run deficits is political economy. Governments are elected for a limited period and try to stay in power by benefiting their electorate. An alternative explanation is that high debts reduce the scope for the subsequent government. So there are good reasons to impose some restrictions to the deficit into the ...

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