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    Canadian federal gov't revenues and expenditures

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    Please answer using a yaer 1 macro Canadian perspective in your reply

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    Answer: Increase in the output, employment will increase the government revenues due to the increase in taxes collected on profits, industrial production, and salaries. Inflation might not have a direct effect on government revenues but in general, increasing inflation will mean that prices are getting higher, and economic activity might be compromised and reduced, and therefore the revenues of the government might also be reduced. Lower interest rates will also spur growth and higher spending by consumers, will spur more borrowing, and in general will increase the economic activity, and therefore increase governmnet revenues.
    The inability of the federal government to restore fiscal balance may directly reduce business and consumer confidence, as the view of the ongoing deficits as a symbol of the nation's inability to address its economic problems permeates society, and the reduction in confidence can discourage investment and real economic activity. Increased interest rates and diminished economic activity may further worsen the fiscal imbalance, which can then cause a further loss of confidence and potentially spark another round of negative feedback effects.

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