The accompanying diagram shows two budget deficit functions for a hypotheticaleconomy.Suppose the economy is at point A, the budget deficit function is Bo, and the levelof potential output is $500 million. The structural budget deficit would beA. $2 million.B. $7 million.C. - $5 million.○ D. $0.C№ 0068-ABudget Surplus/Deficit (millions of dollars)طر+မှာB125 2503750☑500 625 750 875-3-B₁Real GDP (millions of dollars)BВо Consider the following data about government debt and deficit in a given year:― real interest rate on government bonds = 2%- growth rate of real GDP = 2%- current debt-to-GDP ratio = 28%- primary budget deficit as a percentage of GDP = 6%Over this one-year period the debt-to-GDP ratio will haveA. fallen by 6 percentage points.B. risen by 0.6 percentage points.C. remained unchanged.D. risen by 6 percentage points.E. fallen by 0.6 percentage points.

1. When government spending continuously exceeds income, even during times of economic growth and…

Answered: The accompanying diagram shows two…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter12: Federal Budgets And Public Policy

Section: Chapter Questions

Problem 4.9P

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Consider the following budget scenario in an economy for the year. Budget Estimates Tax Revenue (net to Centre) 215650 Recoveries of Loans 20900 Non-tax revenue 84350 Borrowings and other Liabilities 179100 Total Receipts 500000 Expenditure on Revenue Account 345000 Of which Interest payments 20000 Total expenditure On Capital Account 135000 Total Expenditure 500000 Calculate : 1. Revenue Deficit 2. Fiscal Deficit 3. Primary deficit b. Explain in brief the impact of the following: The government of India decides to finance the widening fiscal deficit by raising more debt from the private institutions/individuals . What is this impact known as ? Explain.
1. A college wants to produce an effigy for the student carnival. Preliminary studiesmade it possible to establish that the production of these effigies requires fixed costs of $2,008and variable costs (materials, labor, energy) of $0.90 per effigy. One of therequirements of the college being not to make a deficit, he had a market study carried out.It appears from this study that by selling these effigies for $3.75 we can hope to sell them1,000, whereas by setting the price at $2.50, the potential sales are 3,000.a) Express the demand in terms of the selling price and representgraphically this function.b) Express the cost of production as a function of the selling price.c) Express the income in terms of the selling price and determine the price that thecollege should fix to maximize the income from this sale of effigies.d) Represent the income function and the cost function on the same system of axesand determine the prices corresponding to the break-even thresholds and numbereffigies…
The diagram below shows two budget deficit functions for a hypothetical economy. Budget Deficit (millions of dollars) 14 7.5 4 Real GDP (millions of dollars) 100 200 300 400 500 600 700 Budget Surplus (millions of dollars) Bo B1 FIGURE 31-2 FIGURE 31-2 Refer to Figure 31-2. Initially, suppose real GDP is $100 million and the budget deficit is $14 million, as shown by point A. Which of following vents coul result in a move from point A to point C? A) a fiscal contraction and a decrease in GDP B) a fiscal expansion and an increase in GDP C) a fiscal expansion and a decrease in GDP an increase in GDP with no change in fiscal policy E) a fiscal contraction and an increase in GDP
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'The U.S., world's largest economy, went into recession in February of 2020. It has taken a broad range of steps to combat the economic disruption caused by COVID-19. In response to this crisis, governments have enacted sweeping and sizable fiscal stimulus of trillions of dollars.' Is it an appropriate policy response if the primary responsibility of the government is to maintain economic growth? Explain the significance of Fiscal policy for an economy? Is there any difference in the two approaches of fiscal expansion through - direct transfer benefit and government spending directly on purchase of goods and services that may influence real GDP? What role does multiplier play? Explicate. Support your answer with the suitable diagram/s.
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10 Answer True or False: 1. To reduce the fiscal deficit, the government has to raise taxes or cut spending. 2. The displacement effect is that an increase in government spending, G, causes a reduction in Investment, I. 3. In the simple macroeconomic model of the class, changes in the fiscal deficit do not affect the interest rate. 4. In the simple macroeconomic model of the class, when Disposable Income increases, Consumption increases and Personal Savings also increases. 5. The Covid 19 pandemic has caused a notable increase in the national debt of the United States.

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