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21 Oct 2018

http://money.cnn.com/2018/02/11/news/economy/trump-infrastructure-plan-details/index.html

How can a? $1.5 trillion investment in infrastructure create much more economic growth than the initial? investment?

What are the benefits of increased infrastructure? spending?

Should the federal government increase the federal gas tax to fund the? programs?

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Trinidad TremblayLv2

23 Oct 2018

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Big banks urge Ottawa to spend $20-billion in rapid stimulus

"Two of Canada's big banks want the federal government to pump $20-billion into an economic stimulus for a fast jolt to the flagging economy. Bank of Nova Scotia urged Ottawa to spend that much by mid-2017. Such a measure, the bank said, would equal 1 percent of gross domestic product and would play into its new economic forecast for GDP growth of 1.3 percent this year and 2.5 percent next. Canadian Imperial Bank of Commerce called for $20-billion in the government's first year, saying the pledges on the table just aren't enough. The Liberal government of Prime Minister Justin Trudeau has indeed promised to spend billions in infrastructure stimulus. But, beyond the recent campaign pledges, there have been no details on the final amount, the targets, and the timeline. And remember, the fiscal outlook has changed rapidly, with the Liberals now forecasting a deficit of $18-billion even without their promised spending. Canadians will get the details when Finance Minister Bill Morneau unveils his budget on March 22. While Scotiabank and CIBC are the first to have specific calls, other bank economists have said the further stimulus would be welcome, and that the government certainly has the fiscal room to accommodate it. Scotiabank painted a weak economic picture for 2016, particularly for the oil-shocked province of Alberta, and a national unemployment rate that will top 7 per cent this year and next. It projected the economy of Alberta, which had been the country's economic engine until the oil route, will contract by a further 1.9 percent this year, with a jobless rate of 7.5 percent. Our Canadian forecast incorporates our recommendation for the federal fiscal stimulus of $20-billion, equivalent to 1 per cent of GDP, implemented during the second of 2016 and the first half of 2017, said Aron Gampel, Scotiabank's deputy chief economist. "This stimulus would be over and above the deficit resulting from weaker economic conditions, estimated for fiscal 2016-17 at $18-billion by the federal government," he added. "The stimulus should be designed to: deliver a rapid economic impact; raise Canada's economic capacity and thus our longer-term growth prospects; and, facilitate adjustments in the provinces most affected by weak commodity prices. Once the Canadian economy no longer requires policy support, targeting a declining ratio of net debt-to-GDP should resume." CIBC also weighed in on the stimulus debate today, calling for $20-billion in stimulus over two years. The Liberal pledges had been for $5-billion infrastructure and a further $5-billion in other measures in their first two years in power. But CIBC World Markets doesn't think that's enough given the country's economic troubles. "Federal stimulus under that scenario would be barely more than 0.5 percent of GDP, arguably too little to do the job, particularly with some provinces applying fiscal brakes," said CIBC's Royce Mendes and Avery Shenfeld. "We see a $20-billion stimulus program with a $40-billion deficit as being more appropriate, but given the political sensitivities, the government might show something closer to $35-billion for 2016-17, while perhaps taking on some further stimulus charged to the outgoing year." Some academics believe that in this low-interest-rate environment, what we need is a strong blast of fiscal stimulus to drive employment and growth. They argue that we should reject fiscal austerity and embrace public investment. Indeed, that has been the primary economic platform for the Liberal party, and for some, the reason for them winning a majority in the last election."

(a) The IMF "It is Mostly Fiscal" appears to be what Trudeau and his economic team have bought into. Explain why further fiscal austerity could be particularly painful for the Canadian economy, and how deficit spending may lower the government debt to GDP ratio. Be sure to illustrate using the IS-LM and the AD-AS frameworks.

(b) Discuss why Canadian banks are particularly concerned that the government fiscal stimulus plan may not be enough.

(c) Discuss what are some of the problems with using expansionary monetary policy in an environment of low interest rates. That is, describe the problem of a "liquidity trap."

mauveworm149

TRUE or FALSE?

1. Real GDP can never be greater than potential GDP.

2. When foreign countries experience an increase in income, this is likely to increase our GDP.

3. The United States economy spends about as many months in recession as it spends in expansion.

4. If individuals decrease their consumption spending then this is likely to reduce the growth rate of GDP, all else the same.

5. Movements of real GDP around potential GDP are called the business cycle.

6. If total government spending in a given year was $3.7 trillion, then all of this spending counted directly in GDP as part of the government spending (G) category.

7. The last recession in the United States began in December of 2007.

8. During a recession, the inflation rate tends to decline.

9. Changes in spending that cause firms to change their level of production of goods/services are called supply shocks.

10. All else the same, an increase in income in the United States leads to a decrease in our net exports.

11. Since 1929 there have been 14 declared recessions in the United States.

12. Total spending in the economy is equal to consumption + investment + government spending - net exports.

13. During each recession, potential GDP falls.

14. Percentage wise, the government collects more tax from individuals than it does from firms.

15. During a recession, the Federal Reserve pursues contractionary monetary policy.

16. During a recession, the Federal Reserve is most likely to sell government bonds to the public.

17. Investment spending increases during periods of recession.

18. Congress meets about every 6 - 8 weeks to discuss the performance of the economy and potential changes to fiscal policy.

19. If there is more competition among firms, then the inflation rate will tend to increase.

20.The demand for labor increases when the economy is in an expansionary phase.

21. Total spending by the government is about 20% of GDP in the US economy.

22. The unemployment rate decreases during periods of expansion.

23. If oil prices increase by 20% then this is an example of a supply shock.

24. When the Federal Reserve buys government bonds, interest rates are likely to fall.

25. If Congress wanted to help the economy out of a recession, they would be most likely to reduce government spending and/or increase taxes.

Falsenot in accordance with the fact or reality or actualityMore (Definitions, Synonyms, Translation)

plumeagle724

Taxable Income Range	Marginal Tax Rate
$0 to $10,000	12%
$10,001 to $24,500	18%
$24,501 to $68,000	27%
$68,001 and above	38%

The table shows the taxable income range and marginal tax rates for a single taxpayer in Oceania. There are no exemptions or deductions on personal income taxes in Oceania.

1. Refer to Table 20.1. The income tax paid by George, a single taxpayer with an income of $65,000, is

A.$11,100.

B.$14,745.

C.$15,345.

D.$17,550.

2.The table shows the taxable income range and marginal tax rates for a single taxpayer in Oceania. There are no exemptions or deductions on personal income taxes in Oceania.

Refer to Table 20.1. George is a single taxpayer with an income of $65,000. What is George's average tax rate?

A.19.00%

B.22.68%

C.23.61%

D.27%

3.Of the following countries, in which one was the true marginal tax rate faced by the typical worker lowest and the average number of hours worked per week highest from 1993 through 1996?

A.Italy

B.Canada

C.the United States

D.Germany

4.Unlike with Social Security taxes, there is no threshold on earnings beyond which the Medicare tax collection stops.

False

True

5.Which of the following expenditures is classified as a discretionary expenditure of the U.S. federalâ government?
A.food stamps

B.Social Security

C.federal employee pensions

D.student loans and grants

6.For the U.S. federal government, mandatory spending refers to
A.spending that is not subject to Congress's annual appropriations process.

B.spending on federal employee salaries.

C.spending that never changes in amount from year to year.

D.spending that must be authorized by Congress each year.

7.Based on the current state of revenue of the Social Security and Medicare programs, the government has two options for funding, which are

A.cutting payroll taxes or raising benefits.

B.cutting payroll taxes or cutting benefits.

C.raising payroll taxes or cutting benefits.

D.raising payroll taxes or raising benefits.

8.Which of the following would be classified as fiscal policy?
A.The Environmental Protection Agency enacts stricter air pollution regulations.

B.The Federal Reserve cuts interest rates to stimulate the economy.

C.The federal government cuts taxes to stimulate the economy.

D.States increase taxes to fund education.

9.Automatic stabilizers refer to

A.the money supply and interest rates that automatically increase or decrease along with the business cycle.

B.changes in the money supply or interest rates that are intended to achieve economic stability.

C.changes in federal taxes and purchases that are intended to influence economic activity.

D.government spending and taxes that automatically increase or decrease along with the business cycle.

10.The implementation lag for fiscal policy ________ it is for monetary policy.

A.can be much longer than

B.is usually the same as

C.is generally much shorter than

D.There is not an implementation lag for fiscal policy.

11.When government decides to increase spending, interest rates generally ________ and this change in interest rates ________ investment spending.

A.decrease; increases

B.increase; decreases

C.decrease; decreases

D.increase; increases

12.The marginal propensity to consume is the proportion of each newâ dollar's worth of income that is spent.

True

False

graygoat873

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