ECO 2020 INCLUSIVE ACCESS
21st Edition
ISBN: 9781260564617
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 33, Problem 10DQ
To determine
Public debt.
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Suppose that a family's income is exactly the same as the poverty threshold.
This family's income deficit would be
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O 0; 1
0 ; 0
1;0
O 1;1
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would their income deficit be?
income deficit: $
Question 16
The country of Opulencia loves to live large, but has a major debt problem. It has a national debt of
$800 billion, $400 billion in intergovernmental borrowing, $160 billion in bonds held by domestic
citizens, and $240 billion in bonds held by foreign citizens. Opulencia's public debt is equal to:
O $400 billion
O $640 billion
O $960 billion
O $1,200 billion
If the government deficit/GDP ratio remains constant at 6% a year, the real GDP growth rate is 4% a year and the real interest
rate is 1%, the public debt/GDP ratio will converge to the equilibrium level at
O 210%
O 305%
O 208%
O 368%
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Similar questions
- Consider the following data about government debt and deficit in a given year - real interest rate on government bonds = 1% -growth rate of real GDP = 1% - current debt-to-GDP ratio = 25% - primary budget deficit as a percentage of GDP = 2% Over this one-year period the debt-to-GDP ratio will have O A. risen by 0.2 percentage points. OB. remained unchanged. OC. risen by 2 percentage points. OD. fallen by 2 percentage points. O E. fallen by 0.2 percentage points.arrow_forwardIf the real interest rate on government bonds is three percent, real GDP grows at one percent, the current debt-to-GDP ratio is forty percent and the primary budget deficit as a percentage of GDP is two percent, then the debt-to-GDP ratio will rise in a year by. percentage points. O a. 0.28 O b. 0.82 O c. 2.8 O d. 8.2 O e. 82arrow_forwardSuppose that the investment demand curve in a certain economy is such that investment declines by $110 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $190 billion at each real interest rate for every 1 percentage point increase in the expected rate of return from investment. If stimulus spending (an expansionary fiscal policy) by government increases the real interest rate by 2 percentage points, but also raises the expected rate of return on investment by 1 percentage point, how much investment, if any, will be crowded out? Instructions: Enter your answer as a whole number. billion %24arrow_forward
- Suppose that the investment demand curve in a certain economy is such that investment declines by $110 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $170 billion at each real interest rate for every 1 percentage point increase in the expected rate of return from investment. If stimulus spending (an expansionary fiscal policy) by government increases the real interest rate by 2 percentage points, but also raises the expected rate of return on investment by 1 percentage point, how much investment, if any, will be crowded out? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardWhich of the following will cause a reduction in the debt-to-GDP ratio? O O A) A reduction in the inflation rate B) An increase in consumption spending C) An increase in the growth rate of outputarrow_forward13. Which fiscal policy would make a budget surplus larger or a budget deficit smaller? O lower taxes O increase in government purchases of goods and services O lower government transfers O higher interest ratesarrow_forward
- Suppose that the debt-to-GDP ratio is 0.53, the real interest rate on the debt is 6%, and the growth rate of real GDP is 3%. What is the maximum primary deficit or surplus (as a percentage of GDP) that the government can run and not increase the debt-to-GDP ratio? O A. 1.59% surplus O B. 1.59% deficit OC. 3.18% surplus O D. 3.18% deficitarrow_forwardThe figure shows government expenditure and revenue as a percentage of GDP, 1990-2019. During which of the following periods did the federal government run a budget surplus? 27.0% 25.0% -Expenditures 23.0% 21.0% 19.0% Receipts 17.0% 15.0% YEAR O 1998-2001 None of these answers is correct. O 2003-2008 2012-2018 PERCENT OF GDP 0661 1991 1993 1994 9661 2661 6661 0007 2002 2003 2005 9007 2008 6007 2011 2012 2014 2015 2017 2018arrow_forwardWhich of the following is correct? 1) Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions. 2) The goal of expansionary fiscal policy is to rein in inflation. 3) Expansionary fiscal policy tends to lead to a smaller budget deficit. O 4) Expansionary fiscal policy is always better than contractionary fiscal policy for 4) the economy.arrow_forward
- 10. Study Questions and Problems #10 Evaluate the following statement explaining why our grandchildren may not suffer the entire burden of a federal deficit. True or False: The burden of the national debt on present and future generations depends on who owns the accumulated national debt. If the debt is owned internally, then debt payment is simply a transfer of income between households in the nation in the future. O True O False portion of available tax If, over time, real government budget deficit remains unchanged, and national debt continues to increase, a dollars will be spent on interest payments on the debt, and as a result, can be spent on highways, health care, defense, and other public-sector programs.arrow_forwardWe would expect Canada's cyclical deficit or surplus to equal zero when Select one: O A. the primary budget deficit is zero. O B. the government is not reporting all of its expenses. O C. the overall government budget is balanced. O D. the debt-to-GDP ratio is stable. O E. the economy is at full employment.arrow_forwardQUESTION 16 If the marginal propensity to save is 0.1, the marginal propensity to import is 0.1 and the marginal tax rate is 0.2, how much would consumption increase if income rises by £8billion? O a. 4.8 O b. 13.3 O c. 3.2 O d. 20 4arrow_forward
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