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Macroeconomics Paper- There are currently three major political approaches to fixing the problem with the national debt. 1) One group of advocates is asking that we cut down government expenditures...

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Macroeconomics Paper-
There are currently three major political approaches to fixing the problem with the national debt.
1) One group of advocates is asking that we cut down government expenditures and give more tax breaks and incentives to small and big business.
2) Another group of advocates is saying that we must emphasize our exports by lowering our dollar value or forcing our trade partners – China – to regulate more accurately it’s currency.3) A third group of approaches by saying we should have a balance budget amendment. i) Identify the notable political advocates of all three positions.

Give the pro’s and con’s of each approach.
Length: 2-3 pages.
Add sources (bibliography)
Answered Same Day Dec 26, 2021

Solution

Robert answered on Dec 26 2021
115 Votes
1

National debt is the major concern for most of the economies as it hampers the growth rate of the
economy in the long run. Few economists have suggested three approaches to fix the national
debt problem which follows different criteria to increase the revenue of the government through
tax and non-tax sources. At the same time, there should be reduction in government expenditure
on various avenues like paying interest on debts, or on social welfare activities. These two
factors would simultaneously reduce the gap leading to reduction in national debt. The advantage
of this approach is that it will reduce the tax evasion rate as reduced tax rates would be an
incentive for small and big business to pay their taxes. The disadvantage of the approach is that
eduction in government expenditure might result in less developmental activities of the
economy. As the Laffer curve suggests that initial rise in tax rates would initially increase the tax
evenues earned by the government but after a point, rise in tax rates would reduce the tax
evenue earned as people would start evade paying taxes (Bohn, 2011).
According to the second political advocacy, there should be increase in exports of the country so
that there can be earnings of foreign exchange reserves leading to fall down in outward flow of
payment. As a result, there will be few...
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