Economics:
Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Chapter 4, Problem 8E
To determine

If household and government can spend more than their earnings then what is the difference between these two? The ratio of government spending to GDP. The ratio of payments on debt (interest payment) to GDP.

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Considering the recent expenditure of governments across the world in providing vaccines free of cost to their respective citizens, we assume that government is facing a temporary budget deficit. Based on these circumstances and the additional difficulties due to the ongoing pandemic, please answer each of the following questions related to the country you have or will be speaking about during your presentation. Please write the equation for GDP to reflect a possible budget deficit. Now, based on the above situation, explain in your own words, how will the government for the country of your choice expect to address the situation or has already planned to reduce the budget deficit. Assume you are an investor in your country, how will the choice for investment change due to the expectation of government policy in your response for part (a) above? Explain with the help of a diagram as you feel appropriate. Assume the labor demand has been affected due to the pandemic and as per your…
Suppose the following statistics characterize the financial health of the hypothetical economy Debtenburg at the end of 2017: - 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.   Now that the government’s national debt has been growing for several years, investors have become worried that the…
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