Problems and Applications Q9 Investment can be increased both by reducing taxes on private saving and by reducing the government budget deficit. Average: /2 True or False: It is possible to implement both of these policies at the same time because reducing taxes on private spending has the effect of decreasing the government budget deficit. a. True b. FalseWhat would you need to know in order to judge which of these two policies would be a more effective way to raise investment? Check all that apply. a. The elasticity of private saving with respect to the after-tax real interest rate b. The responsiveness of private saving to increases in investment c. The response of private saving to changes in the government budget deficit

1. The given statement " It is possible to implement both of these policies at the same time because reducing taxes on private spending has the effect of decreasing the government budget deficit " is FALSE

2. a. The elasticity of private saving with respect to the after-tax real interest rate

c. The response of private saving to changes in the government budget deficit

These two policies would be a more effective way to raise investment

Explanation:

1. Fiscal policy relates to the usage of the government spending to have an effect on the economy. It covers federal expenditures and taxation assessed. The strategy is considered to be expansionary if the government invests excessively on spending things such as roads or if taxes are reduced. Such measures are usually used to improve efficiency and the economy. Conversely, the strategy is contractionary whenever government expenditure is decreasing or taxes are increasing.

2. Real interest rate impacts private savings adversely if performance uncertainty, aged age, after all, we conclude the data transparency and conceptually contradictory description of a environment where tax policy will not generate anomalies and where agents are believed the real interest rate elasticity is not specific for net debtor countries.

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