Answer to Question #33418 in Microeconomics for andres
The MBTA runs a chronic deﬁcit. Recent attempts to close the budget shortfall have included
fare hikes. What must be true of price elasticity of demand for MBTA service in order for fare
hikes to actually reduce its operating deﬁcit?
Deficit reduction in the United States refers to taxation, spending, and economic policy debates and proposals designed to reduce the Federal budget deficit. Government agencies including the Government Accountability Office (GAO), Congressional Budget Office, the Office of Management and Budget (OMB) and the U.S. Treasury Department have reported that the federal government is facing a series of important financing challenges. In the short-run, tax revenues have declined significantly due to a severe recession and tax policy choices, while expenditures have expanded for wars, unemployment insurance and other safety net spending. In the long-run, expenditures related to healthcare programs such as Medicare and Medicaid are projected to grow faster than the economy overall as the population matures