HW6-10 - Econ 1500: HW5: Fiscal policy Part 1: From Mankiw,...

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Econ 1500: HW5: Fiscal policy Part 1: From Mankiw, chapter 16 and lectures: 1. Explain the link between life-expectancy and forecasts of future government deficits. 2. How would these forecasts be affected by i. increases in the retirement age ii. increases in immigration iii. increases in birth rates 3. Suppose that a nation’s debt, inflation, and GDP growth rate are all equal to zero, and its interest rate is 5 percent. In year t, the nation runs a deficit equal to 10% of GDP, and then eliminates the primary deficit in year t+1 and afterward. Calculate the deficit (as a fraction of GDP) in years t+1 and t+2. 4. Consider the following two statements: (1) Higher taxes mean a country can provide better property rights protection, better education, better infrastructure and faster growth? (2) Higher taxes hurt incentives to invest and thereby slow growth. What key issues do you need to consider in evaluating the validity of (1) and (2)? 5. There are three ways to finance expenditures in the short-run. What are they?
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This note was uploaded on 10/09/2010 for the course ECON 1500 taught by Professor Carkovic during the Fall '10 term at Brown.

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HW6-10 - Econ 1500: HW5: Fiscal policy Part 1: From Mankiw,...

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