unit 7 DQ Macroeconomics

unit 7 DQ Macroeconomics - by a later administration. The...

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Hello professor and class, The short term effect is that it takes money out of circulation, money that would otherwise be available to borrow to increase productivity or investments. The long term effect is that debt is a drag on the economy. Today about 1/4 of our entire federal budget is interest on the debt. This is equivalent to all the income taxes paid by everyone. And thats just interest, the debt remains. We are so far in debt now that there is a new short-term cost. Our creditors are worried about lending good money after bad, so our bond ratings are suffering, so we have to pay more interest than before. Our currency is beginning to lose its value. But it's still easy for a president to just borrow more money to throw at any problem, because the costs will be paid
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Unformatted text preview: by a later administration. The benefits of economic development always outweigh the costs in a free market, capitalistic economy. Due to competition, businesses are always coming up with new, better and cheaper ways of doing things. This allows them to make more money and to pay their workers more money. So although there are always costs of doing business, there are also always profits to be made by the most competitive businesses. So in a capitalistic society, the standard of living always goes up. In addition, the quality of life goes up along with it. I think if we want to reduce the budget deficit we need to reduce government spending or increase taxes. We probably need to both. Source; www.brookings.edu/views/papers/orszag/20040105.htm www.economist.com...
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