Suppose that a country has no public debt in year 1 but experiences a budget deficit of $30 billion in year 2, a budget surplus of $10 billion in year 3, and a budget deficit of $2 billion in year 4. Instructions: In part a, enter your answer as a whole number. For the absolute size of the public debt, enter your answer as a positive number. In part b, round your answer to 2 decimal places. a. What is the absolute size of its public debt in year 4? $4 30 billion b. If its real GDP in year 4 is $104 billion, what is this country's public debt as a percentage of real GDP in year 4? 3076 percent

Suppose that a country has no public debt in year 1 but experiences a budget deficit of $30 billion in year 2, a budget surplus of $10 billion in year 3, and a budget deficit of $2 billion in year 4. Instructions: In part a, enter your answer as a whole number. For the absolute size of the public debt, enter your answer as a positive number. In part b, round your answer to 2 decimal places. a. What is the absolute size of its public debt in year 4? $4 30 billion b. If its real GDP in year 4 is $104 billion, what is this country's public debt as a percentage of real GDP in year 4? 3076 percent

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 51P: A government starts off with a total debt of $3.5 billion. In year one, the government runs a...

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A government starts off with a total debt of $3.5 billion. In year one, the government runs a deficit of 400 million. In year two, the government runs a deficit of 1 billion. In year three, the government runs a surplus of 200 million. What is the total debt of the government at the end of year three?
Is it possible for a nation to run budget deficits and still have its debt GDP ratio fall? Explain your answer. Is it possible for a nation to run budget surpluses and still have its debt GDP ratio rise? Explain your answer.
Explain how automatic stabilizers work, both on the taxation side and on the spending side, first in a situation where the economy is producing less than potential GDP and then in a situation where the economy Is producing more than potential GDP.
What is the difference between a budget deficit and the national debt?
What is the main advantage of automatic stabilizers over discretionary fiscal policy?
In a recession, does the actual budget surplus or deficit fall above or below the standardized employment budget?
Specify whether expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below and sketch a diagram using aggregate demand and aggregate supply curves to illustrate your answer: A recession. A stock market collapse that hurts consumer and business confidence. Extremely rapid growth of exports. Rising inflation. A rise in the natural rate of unemployment. A rise in oil prices.
Debt has a certain self-reinforcing quality to it. There is one category of government spending that automatically Increases along with the federal debt. What Is It?
How would a balanced budget amendment change the effect of automatic stabilizer programs?
What is the main reason for employing contractionary fiscal policy in a time of strong economic growth?