Social Security and Medicare Users The U.S deficits, surpluses, and debts affect Social Security and Medicare users, because when the economy is facing any of these problems one of the ways the government acquires the funds to help is by drawing on the funds availab... ... middle of paper ... ...as debt measures against the country’s GDP. As the value of the GDP increases either through inflation or real growth the ratio of the debt-to-GDP shrinks and debt becomes less burdensome. Surpluses allow a government the ability to pay down its debt or expand its capability to incur more debt since the economy is richer. The burden of debt on future generations is the debt service or interest rate on debt times the total debt which must be paid annually. Conclusion Through all the economics problems, the United States have encountered in the past decade (operating with more deficits than surpluses) it has remained most powerful economic country in the world (Nordqvist, 2013).
Toshiyuki Kimbara Economics 335 Currency Values and Exchange Rates There are several key factors that causes currency values to change and they are: Gross Domestic Product (GDP), inflation, the balance of payment and trade, public debt, and interest rates. The GDP measures a country’s economy since it calculates the total market value of all goods and services. When the GDP of a country increases, the national currency will rise up as well. Inflation measures the rate where the general level of prices for goods and services are increasing while the purchasing power is decreasing. Countries with low inflation rates will have a higher currency since there is an increase in purchasing power., but high inflation will decrease the value of the currency.
So overall growth is significantly increased. Inflation on Monetary Policy Inflation is an increase in the general level of prices. If interest rates fall households are not willing to save as much because they get a lower return therefore consumption spending increases. When interest rates fall households will get a loan to buy items because the cost of borrowing is cheaper so they will spend on their wants. Overall this will increase aggregate demand which will cause demand pull inflation.
The first crowding-out effect is normally caused when a government decides to deficit spend in order to recover an economy from a recession. This effect happens when the government’s deficit spending starts to increase the interest rates. The increase in interest rates affects the private sector of the economy. As interest rates, rise individuals and business are more likely to save then spend as their money. This can cause an economy to stop growing and stagnate.
Keynesianism and monetarism are both ways to stabilize the economy and promote growth when need. In keynesianism, government uses fiscal policy which is a list of policies that government spending and taxing can be used to improve the performance of an economy. The government produces stabilization by taxing and spending yearly plans. Taxing can occur when inflation is high and lowering taxes tends to occur during a high percentage of unemployment. By lowering taxes, it increases disposable income or the party of income that goes to financial responsibilities.
So the actual matter of concern is the work of government spending. Usually the increase in public expenditure causes fiscal deficit which disfigure the economy. Governments take different measure to reduce fiscal imbalances like cut in development expenditure, subsidies and social spending which affects the welfare. If the reduction in fiscal deficit is a matter of concern then the government can reduce fiscal deficit by increasing productivity and growth rather hen reducing expenditure.
To Reduce unemployment 4. To avoid large deficit on current account balance of payments Fiscal Policy The Fiscal Policy may be Expansionary or Deflationary. Currently the policy is expansionary. This involves increasing AD, therefore the government will increase spending and cut taxes. Lower taxes will increase consumers spending because they have more disposable income.
Fiscal Policy is described as changing the taxing and spending of the federal government for purposes of expanding or contracting the level of aggregate demand; these are designed to increase short-run economic growth. In a recession, an expansionary fiscal policy involves lowering taxes and increasing government spending. By cutting taxes, increasing government spending programs, and increasing transfer payments, more money is in the economy, more income, and more spending. This can be done through the federal budget process; however, the problem with fiscal policy is lag time. This process can take so long (as long as a year or more) that Discretionary Fiscal Policy is very rarely used in the federal governmen...
Even though the economy could benefit from the budget deficit such as economic growth, the economists do not want to take a chance on that. Also, some economists are also concerned that higher borrowing by the government may also openly result in reduced utilization spending. They argue households recognize that higher current government borrowing results in highe... ... middle of paper ... ...ful spending because it is taking a toll on our future, our children’s future, and our children’s children future. Works Cited 1. Case.
The dollar appreciated because of the recovery from the global recession of 1981-82, and in huge U.S. federal budget deficits which created a significant demand in the United States for foreign capital. That, in turn, drove up interest rates, and led to the rise of the dollar. Exports are determined by international prices, trade agreements, and the real GDP of foreign countries. All things being equal: the higher foreign prices, the more liberal trade agreements and the higher the real GDP of foreign countries, the higher the exports become. Exports are autonomous of real GDP.