In a small open economy, output (gross domestic product) is $35 billion, government purchases are $8...

  

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In a small open economy, output (gross domestic product) is $35 billion, government purchases are $8 billion, taxes are $8 billion, and net factor payments from abroad are zero. Desired consumption and desired investment are $21 billion and $5 billion, respectively. Suppose the government initiates a single tax cut of $1.0 billion but keeps its current and future purchases intact. Assume the Ricardian equivalence proposition holds. What are the changes in budget deficit and the current account balance (CA)? The budget deficit by $ billion, CA changes by $ billion, and in this case the theory of "twin deficits" is valid not valid In a small open economy, output (gross domestic product) is $35 billion, government purchases are $8 billion, taxes are $8 billion, and net factor payments from abroad are zero. Desired consumption and desired investment are $21 billion and $5 billion, respectively. Suppose the government initiates a single tax cut of $1.0 billion but keeps its current and future purchases intact. Assume the Ricardian equivalence proposition holds. What are the changes in budget deficit and the current account balance (CA)? The budget deficit billion, CA changes by $ by $ increases decreases se the theory of "twin deficits" is In a small open economy, output (gross domestic product) is $35 billion, government purchases are $8 billion, taxes are $8 billion, and net factor payments from abroad are zero. Desired consumption and desired investment are $21 billion and $5 billion, respectively. Suppose the government initiates a single tax cut of $1.0 billion but keeps its current and future purchases intact. Assume the Ricardian equivalence proposition holds. What are the changes in budget deficit and the current account balance (CA)? The budget deficit by $ billion, CA changes by $ billion, and in this case the theory of "twin deficits" is valid not valid In a small open economy, output (gross domestic product) is $35 billion, government purchases are $8 billion, taxes are $8 billion, and net factor payments from abroad are zero. Desired consumption and desired investment are $21 billion and $5 billion, respectively. Suppose the government initiates a single tax cut of $1.0 billion but keeps its current and future purchases intact. Assume the Ricardian equivalence proposition holds. What are the changes in budget deficit and the current account balance (CA)? The budget deficit billion, CA changes by $ by $ increases decreases se the theory of "twin deficits" is

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Basically the twin deficits phenomenonis the observation that theretically there is a strong c... View the full answer