Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
20th Edition
ISBN: 9780078021756
Author: McConnell, Campbell R.; Brue, Stanley L.; Flynn Dr., Sean Masaki
Publisher: McGraw-Hill Education
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Chapter 5, Problem 5DQ
To determine
The political incentives to approve the budget deficit.
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Students have asked these similar questions
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%
9. True or false? If the statement is false, explain why: LO4
a. An internally held public debt is like a debt of the left hand owed to the right hand.
b. The Federal Reserve and federal government agencies hold more than half the public debt.
c. As a percentage of GDP, the federal debt held by the public was smaller in 2010 than it was in 1990.
d. As a percentage of GDP, the total U.S. public debt is the highest such debt among the world’s advanced industrial nations.
If 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. 82
Chapter 5 Solutions
Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
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- 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_forwardTable 27-1 Y- C+I-G C- s00 - 0.S(Y – T) I- 300 G- 700 T- 0.25Y Table 27-1 Y= C+I+G C- 500 - 0.S(Y-T) I- 300 G- 700 T- 0.25Y Refer to Table 27-1. What is the level of tax revenues in this model? O a. 437.5 O 0. 1,000 OC 945.5 O0.937.5 O e.950arrow_forwardWhich of the following statements is correct? Choose an answer: O 1. Regardless of which side of the market the tax is levied on, the more inelastic side of the market bears the higher tax burden. O 2. If the supply is more elastic than the demand, then the suppliers bear the greater tax burden than the buyers. 3. The tax burden is incurred on the side of the market where the tax is levied. O 4. The tax burden is always borne half by the supplier and half by the customer. O 5. If the demand is more inelastic than the supply, then the providers bear the greater tax burden than the buyers. O00arrow_forward
- If the tax code exempts the first $20,000 of income from taxation and then taxes 25 percent of all income above that level, then a person who earns percent and a marginal tax rate of $50,000 has an average tax rate of percent. Â O 15, 25 O 25, 15 O 25, 30 O 30, 25arrow_forwardSuppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, all citizens must pay 10 percent in taxes on their first $10,000 in earnings and then 50 percent in taxes on anything else they might earn. Given that George earned $20,000 last year, his marginal tax rate on the last dollar he earns will be rate for his entire income will be and his average tax O 10 percent; 50 percent O 50 percent; less than 50 percent O 10 percent; less than 50 percent O 50 percent; 50 percentarrow_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
- 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 billionarrow_forwardConsider 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_forwardSuppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, each citizen must pay 10 percent in taxes on their first $10,000 in earnings and then 50 percent in taxes on anything else they might earn. So given that George earned $20,000 last year, his marginal tax rate on the last dollar he earns will be __________ and his average tax rate for his entire income will be _________________.                 a. 50 percent; 50 percent.          b. 50 percent; less than 50 percent. c. 10 percent; 50 percent.              d. 10 percent; less than 50 percent.arrow_forward
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