Long–Run Consequences of Stabilization Policies

Depressed aggregate demand leading potentially to recession.

Balanced government budgets due to controlled spending.

Strengthened domestic currency promoting cheaper imports.

Increased competitiveness abroad from predictable pricing.

Interest rates are likely to fall significantly.

Only short-term interest rates would decrease slightly.

Interest rates are likely to rise.

There would be no significant change in interest rates.

LOWER TAX RATES RESULTING IN DECREASED GOVERNMENT REVENUE.

REDUCTION IN EXPORTS DUE TO A STRONGER NATIONAL CURRENCY.

Increased interest rates reduce private investment due to increased government borrowing.

INCREASED GOVERNMENT SPENDING LEADS TO REDUCED PRIVATE SAVINGS.

Raising income tax rates for higher earners.

Increasing government spending without raising taxes.

Reducing non-essential governmental programs.

Decreasing government subsidies to businesses.

It can lead to increased national debt

It always results in a budget surplus

It has no impact on the national debt

It always reduces the national debt

Savings rate

Inflation rate

Trade deficit

Budget surplus

It increases

It fluctuates based on inflation rates only

It decreases

It stays the same

A budget deficit is when tax revenues exceed government spending, while a budget surplus is when government spending exceeds tax revenues

A budget deficit and a budget surplus both represent a situation where government spending exceeds tax revenues

A budget deficit and a budget surplus both represent a situation where tax revenues exceed government spending

A budget deficit is when government spending exceeds tax revenues, while a budget surplus is when tax revenues exceed government spending

Multiplier effect.

Crowding out effect.

Absolute advantage.

Comparative advantage.

The budget surplus offsets the national debt.

The national debt increases.

The national debt decreases.

The national debt remains unchanged.