econ-Journal24 - governments borrowing to finance deficits...

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Duc Hoang – ECON210 Journal – The next front is fiscal (The Economists) Date 11/8 Fiscal stimulus has chance to grow this period of time as the world economy is seriously in the down turn while interest rate cut seems not to be a perfect solution. Lower interest rate will reduce consumers’ willing to buy and business’ willing to invest since asset and credit values decline. Moreover, according to the Economists, “in America, short-term rates have little room to fall further.” When market demand is weak, cutting taxes allow consumers to increase their budget. However, reduce tax revenue will require an increase in
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Unformatted text preview: governments borrowing to finance deficits which leads to the crowding-out effect, thus leaving the private sector unwilling to spend and invest. The scope for fiscal stimulus varies from countries to countries where there are different sizes of budget deficits. Although America has the biggest current-account deficit, it still has the greatest scope for fiscal stimulus. It is because of the fewer automatic stabilizers than other countries where spending on fixing unemployment issue is rising in recession....
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This note was uploaded on 03/10/2011 for the course ECON 101 taught by Professor Duc during the Spring '05 term at Linfield.

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econ-Journal24 - governments borrowing to finance deficits...

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