Answer on Macroeconomics Question for jeyam
This isn’t a “spending” expansionary budget, it’s a contractionary one.
Basic macro analysis. First derivative of demand side identity:
ΔY = ΔC + ΔI + ΔG + ΔNX
Since ΔG (the budget deficit) is negative, the impact on ΔY is also negative. This isn’t a “spending” expansionary budget, it’s a contractionary one. Moreso since the main cuts appear to be on public investment which has a higher multiplier. Note: what they spend on is actually not relevant from this point of view. Only the changes matter.
Need a fast expert's response?Submit order
and get a quick answer at the best price
for any assignment or question with DETAILED EXPLANATIONS!