Chapter 17 note

Arbitrariness in defining surpluses and deficits

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Unformatted text preview: amount of money to buy bonds, but printing too much money can cause inflation • These capabilities given to the Federal Government are to remedy short term issues, not meant for long term practice. Arbitrariness in Defining Surpluses and Deficits • Whether a nation has a deficit or surplus depends on what is included as revenues and expenditures • There are many ways to measure expenditures and receipts, so there are many ways to measure deficits and surpluses • Deficit and surplus figures are summary measures of the financial health of the economy • To understand the summary, you must understand the methods that were used to calculate it Structural and Passive Deficits • Many government revenues and expenditures depend on the level of income in the economy • Structural deficit is the part of the budget deficit that would exist even if the economy were at its potential income Passive deficit is the part of the deficit that exists because the economy is operating below its potential level of output Structural and...
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This note was uploaded on 10/30/2013 for the course ECON 250 taught by Professor Finnigan during the Fall '12 term at Marist.

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