(Table: National Income Accounts) Use Table: National Income Accounts. The value of tax revenue is: Table: National Income Accounts Trillions GDP $20.0 Consumption 14.0 Government Spending 3.0 Exports 2.2 Imports 2.7 Budget Balance -1.2 $1.8 trillion. $4.9 trillion. $2.1 trillion. $1.6 trillion.
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- 2. Calculating the debt to GDP ratio Suppose the following statistics characterize the financial health of the hypothetical economy Spendia at the end of 2017: • Gross domestic product (GDP) is equal to $100 billion. • The national debt is equal to $130 billion. • The government has a budget deficit of $7 billion. • The debt ceiling in Spendia is set at $148 billion. The following calculations help you see how the ratio of debt to GDP changes from one year to the next. Complete the first row of the following table by computing the ratio of national debt to GDP. Suppose that nominal GDP remains at $100 billion in 2018, and again the government runs a budget deficit of $7 billion. For simplicity, assume the interest rate on the national debt is 0%, and no payments are being made to reduce the debt. Calculate national debt and the debt-to-GDP ratio in 2018. Enter these values in the second row of the following table. Year 2017 2018 GDP National Debt (Billions of dollars) (Billions of…2. Calculating the debt to GDP ratio The following calculations help you see how the ratio of debt to GDP changes from one year to the next. Suppose that in a hypothetical country with a currency called the ducat, debt is equal to 140 trillion ducats and GDP is equal to 100 trillion ducats. This means that the ratio of debt to GDP is 1.4, or 140%. Also, suppose that the deficit is 7 trillion ducats, which is 7% of GDP. Aa Aa When the government runs a deficit, it spends more than it collects in tax revenue. To make up the difference, it borrows. So if it runs a deficit of 7 trillion ducats, debt increases by 7 trillion ducats. So debt next year is 147 trillion ducats. Suppose that there is no growth in real GDP and inflation is equal to -2% per year. (Negative inflation is the same as deflation.) Next year's GDP will be equal to trillion ducats. If the ratio of debt to GDP is 1.4 this year, the ratio of debt to GDP next year when inflation is equal to -2% per year will be Suppose that…2. Calculating the debt to GDP ratio Suppose the following statistics characterize the financial health of the hypothetical economy Splurgium at the end of 2017: Gross domestic product (GDP) is equal to $160 billion. • The national debt is equal to $240 billion. • The government has a budget deficit of $8 billion. The debt ceiling in Splurgium is set at $264 billion. The following calculations help you see how the ratio of debt to GDP changes from one year to the next. Complete the first row of the following table by computing the ratio of national debt to GDP. Suppose that nominal GDP remains at $160 billion in 2018, and again the government runs a budget deficit of $8 billion. For simplicity, assume the interest rate on the national debt is 0%, and no payments are being made to reduce the debt. Calculate national debt and the debt-to-GDP ratio in 2018. Enter these values in the second row of the following table. GDP National Debt (Billions of dollars) (Billions of dollars) Ratio of…
- Question 17/28 > NEXT A BOOKMARK 17 The two largest areas of federal spending which impact the U.S. budget are Total Federal Spending 2015: $3.8 Trillion Housing & Community $61.5 billion - 2% Energy & Environment $50.2 billion - 19% 48 bilion-1% International Affairs Science $29.8 billion - 1% Transportation, $85 billion - 2% Education $102.3 bilion - 3%. Social Security Unemployment Labor L$1.275.7 bilion -33% Food & Agriculture. $135.7 biion 4% Veterans Benefits, $160.6 billion-4% Interest on Debt $229.2 bilion -6% Miltary S609.3 bilion - 16% Medicare & Health $1.051.8 billion-27% PRIORITIES nationalpriotes.org A Medicare and Veteran Affairs B Social Security and Interest on the debt C Defense and Education Medicare and Social Security DELL6. Graphical treatment of taxes and fiscal policy The main difference between variable taxes and fixed taxes is that unlike fixed taxes, variable taxes do not vary with GDP The following graph shows the consumption schedule for an economy with a given level of taxes. Suppose the government implements a tax increase through a fixed tax. Use two green points (triangle symbol) to connect the two black points (plus symbols) representing the consumption schedule after the change in taxes. Hint: The new consumption schedule must pass through one point on the left and one point on the right. Hint: The new consumption schedule must pass through one point on the left and one point on the right. 50 Consumption with Tax Increase through a Fixed Tax Consumption with Tax Increase through a Variable Tax + 20 40 60 80 100 REAL GDP (Billions of dollars) The blue line on the next graph represents the original total expenditure line for this economy before the change in tax structure. Use the new…Question 18/28 > NEXT A BOOKMARK 18 According to the pie chart, which of the following provides the most revenue for the federal government? Federal Tax Revenue 2015: $3.18 trillion Corporate Inco Taxes Miscellaneous Individual Income Taxes Excise Taxes $1.48 trillion 47% Customs Duties Payroll Taxes $1.07 trillion 34% nationalpriorities.org PRIORITIES A Individual income taxes B Corporate taxes C Payroll taxes D Excise taxes DELL -> @ # $ 7 8. 1 4 W e y < O 5
- Price level (GDP deflator, 2000 - 100) LRAS SRAS Real GDP (trillions of 2000 dollars) In the figure above, if the economy is at point A, the appropriate fiscal policy by the US Congress and the President would be to raise income taxes. O raise interest rates lower interest rates O lower income taxes6. Budgetbalances and the national debt The following table lists federal expenditures, revenues, and GDP for the U.S. economy during several years. Revenues Year (Billions of dollars) 1929 3.9 1948 1967 1986 2005 41.6 148.8 769.2 2,153.9 Expenditures (Billions of dollars) 3.1 29.8 157.5 990.4 2,472.2 GDP (Billions of dollars) 103.6 269.2 832.6 4462.8 12,421.92. Calculating the debt to GDP ratio Suppose the following statistics characterize the financial health of the hypothetical economy Debtenburg at the end of 2017: • Gross domestic product (GDP) is equal to $150 billion. • The national debt is equal to $180 billion. • The government has a budget deficit of $9 billion. • The debt ceiling in Debtenburg is set at $198 billion. The following calculations help you see how the ratio of debt to GDP changes from one year to the next. Complete the first row of the following table by computing the ratio of national debt to GDP. Suppose that nominal GDP remains at $150 billion in 2018, and again the government runs a budget deficit of $9 billion. For simplicity, assume the interest rate on the national debt is 0%, and no payments are being made to reduce the debt. Calculate national debt and the debt-to-GDP ratio in 2018. Enter these values in the second row of the following table. Year 2017 2018 GDP National Del (Billions of dollars) (Billions of…
- (Use for a and b)Suppose the interest on the debt was $700 billion. If interest is paid domestically, 90% will be spent domestically (the remainder is spent on foreign goods). If interest is paid to the foreign sector, only 10% is spent here (the remainder is spent in foreign countries). Every dollar collected in taxes to pay the interest causes domestic spending to fall 90 cents. The spending multiplier is 2. a) What is the net impact on GDP if all interest is paid domestically? b) What is the net impact on GDP if 20% of the interest is paid to the foreign sector? c)What are the desirable qualities of an efficient commodity money?Question: "In a hypothetical economy, the government implements a fiscal stimulus package by increasing public spending on infrastructure projects. At the same time, there is a significant rise in consumer savings rates. Discuss the potential short-term and long- term impacts of these simultaneous events on the economy's aggregate demand, interest rates, and inflation. Consider how these changes might affect the effectiveness of the fiscal stimulus in achieving its intended economic objectives."Write 3 difference between revenue expenditure and capital expenditure
