spending is $100 million each year a that tax collections are always 50 pe of gross domestic product (GDP). Assume that the natural level of GD level of full-employment) is $220 mi and the actual level of GDP is $180 million. Calculate the actual budget

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter12: Fiscal Policy, Incentives, And Secondary Effects
Section: Chapter Questions
Problem 1CQ
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Suppose that the total government
spending is $100 million each year and
that tax collections are always 50 percent
of gross domestic product (GDP).
Assume that the natural level of GDP (or
level of full-employment) is $220 million,
and the actual level of GDP is $180
million. Calculate the actual budget
deficit and the cyclically-adjusted budget
deficit
Transcribed Image Text:Suppose that the total government spending is $100 million each year and that tax collections are always 50 percent of gross domestic product (GDP). Assume that the natural level of GDP (or level of full-employment) is $220 million, and the actual level of GDP is $180 million. Calculate the actual budget deficit and the cyclically-adjusted budget deficit
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