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If the real interest rate on government bonds is three percent, real
a.
82
b.
0.82
c.
2.8
d.
8.2
e.
0.28
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- 07. What factors make an expansionary "stimulus" fiscal policy effective? One answer a) A government budget deficit associated with fiscal stimulus should should borrow money from those who spend less and save more, to those who spend more and save less. b) A permanent decrease in taxes is more effective in stimulating spending than a temporary one c) An increase in government purchases of goods and services should be temporary and should not permanently displace private spending d) The most expansionary way of financing the budget deficit associated with a fiscal stimulus policy is by the central bank expanding the quantity of money in circulation. e) Infrastructure investment belongs with long-term growth policy, but invariably makes a poor element in stimulus policy because such investment normally take a long time to implement. f) All the aboveA government fınances all of its debt through 1-year treasury bonds. This government is able to collect $175 million in tax revenue and the country has a GDP of $765 million. If this government is able to consistently sell treasury bonds which yield 3.29% interest, what is the maximum debt-to- GDP ratio this country could maintain and still make all interest payments? Put your answer in percentage form (e.g. 30.57 not 0.3057) and then round to two decimal places.3. Assume the following information for Nation XYZ: * National debt in 2005 was $150... in 2015 national debt was $375 GDP in 1990 was $125... in 2000 the GDP was $300 A. What was the average increase in debt for Nation XYZ between the years 2005 and 2015 B. What was the average annual budget deficit for Nation XYZ between the years 2005 and 2015 C. Compute the debt-to-GDP ration to Nation XYZ for both 2005 and 2015
- In addition to issuing bonds, explain any two major ways the government can raise revenue to finance her spending#7Suppose the government's present value of current and projected future outlays is 75 percent of GDP and its present value of current and projected future revenues is 50 percent of GDP. What gap does this describe, and what is the size of the gap? This information describes the _______. A. fiscal gap, which is 25 percent of GDP B. generational gap, which is 25 percent of GDP C. fiscal gap, which is 125 percent of GDP D. fiscal gap, which is – 25 percent of GDP
- Always use economic terms, diagrams. "Counter-cyclical fiscal policy works. If consumers and businesses lose confidence because of the changing world, the government can fix this economic problem - that is what the Biden $1.9 trillion stimulus was all about. Sure, there might be some issues with the deficit, but given a recovery, the government can pay that deficit off. Also, since we are in a very inflationary period again we might expect counter-cyclical fiscal policy to resolve some of the debt issues." Please explain this comment. (Hint: don't forget to use an AS AD diagram and possibly a business cycle diagram).12. The national debt in the current year is equal to the national debt at the beginning of the year minus the annual budget deficit. a. b. equal to the national debt at the end of the year plus the annual budget deficit. equal to the national debt at the beginning of the year plus the annual budget deficit. C. d. none of the above. H. IExplain how a budget deficit arises and what actions governments must take in this circumstance and how does the budget deficit relates to the national debt, use examples, please!
- Read the following premise carefully and answer the questions specifically and in detail. "In the face of unstable economic growth due to a recession or accelerated inflation, the potential problems of high public debt include increased income inequality, reduced economic incentives, and crowding out private investment." A. Express in detail the effects of expansionary and contractionary fiscal policy on income and the price level. B. Using the premise presented as a basis, argue about the intervention of fiscal policy as an instrument to promote the growth, sustainability and economic stability of a country. (Gives an example in detail.)Suppose that the debt-to-GDP ratio is 0.59, the real interest rate on the debt is 8%, 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? A. 2.95% surplus B. 4.72% surplus C. 4.72% deficit D. 2.95% deficitThe government budget is in DEFICIT when T - G - Transfers (TR) - Interest on the Debt (INT) < 0 Government expenditures (G) - Investment expenditures (I) < 0 Taxes (T) - G > 0 G - Consumption expenditures (C ) - I > 0
