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6

It's called seigniorage. This actually goes on to some degree in every country. I don't think any country has ever relied solely on this to cover all its expenses. (Those that come close usually suffer from hyperinflation.) Briefly googling I found this old graph (source). With more work you can probably find more up-to-date figures. Note that although the ...

4

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 ...

4

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 ...

3

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, ...

3

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 ...

2

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 ...

2

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 ...

2

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 ...

2

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.

2

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 ...

2

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 ...

1

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 ...

1

The US has a very large debt and has been in debt since at least the 1830s. So any annual budget surplus simply goes towards paying off the debt. In countries that have net savings, these go to the country's reserves. Some countries have their own special investment funds to invest these surplus funds — e.g. Singapore, Norway.

1

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 ...

1

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 ...

1

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 ...

1

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 ...

1

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 ...

1

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 ...

1

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 “...

1

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 ...

1

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 ...

1

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 keep things concrete: (1) Has it been tried? If one wants to take a very strict definition of "tax", it may be possible that some resource-...

1

Any government that removed the backing on the currency will turn the currency into commodities. From there on, the currency will take the path of any commodities. Unless the state expenses bring immediate production value to the economy, otherwise, its value will diminish (we call it inflation) over other commodities. Historically, there are only two ...

1

The book is talking about the short term effect. And yes, such a policy would be thought as Keynesian. In the long run, excessive government spending will cause inflation (if unfunded) or reduce both private production and demand (due to excessive taxation).

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There are a few reasons why, at least in a broader theoretical context, substantial government influence in a market economy may have negative consequences. A few are: Crowding Out Effect Increases in government spending can potentially lead to a decrease in investment from the private sector. This can be thought of in the more formal definition of the term ...

1

The government cuts public spending but continues to "run a deficit by borrowing from the central bank." This is the polite way to say "increase yearly the money supply by an amount equal to the government's deficit". So the money supply will also increase in the second year, albeit by a smaller amount than before. But increase it will.

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If the opposite were true and the government proposes spending \$1 trillion on infrastructure spending we will see a shift outward of the demand curve and rates will tick upward to a new equilibrium point. The crowding out occurs when we have movement along the demand curve (from the old interest rate --> new demand curve intersection up to the new ...

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