Assume that the nominal interest rate is 11 percent, the inflation rate is 8 percent, and government debt at the beginning of the year equals $4 trillion. By how much is the government budget deficit overstated as a result of inflation? A) $0.12 trillion B) $0.32 trillion C) $0.44 trillion D) $0.80 trillion

Assume that the nominal interest rate is 11 percent, the inflation rate is 8 percent, and government debt at the beginning of the year equals $4 trillion. By how much is the government budget deficit overstated as a result of inflation? A) $0.12 trillion B) $0.32 trillion C) $0.44 trillion D) $0.80 trillion

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

See similar textbooks

Similar questions

Suppose the national debt of a country is currently $400 billion dollar and the national nominal deficit for the country is $50 billion. Inflation rate has been 5%. What is the real deficit? Suppose that part of the $50 billion deficit came from the government buying $ 10 billion of natural resources to store for future use. What would the nominal deficit be under capital budgeting? 8) a) b)
the nominal federal budget deficit in the US is about $1.7 trillion and outstanding debt is about $33 trillion. What is the real deficit if the inflation rate is 4%? a) 3 trillion b) -0.4 trillion c) 0.4 trillion d) none of the above
6) If the inflation rate is 3 percent, real GDP growth is 2 percent, and the current budget deficit is $100 billion, what must the current national debt be if the debt-GDP ratio is to remain the same? A) $2,000 billion B) $1,429 billion C) $5,000 billion D) S1,111 billion
What is the value of interest payments of goverment when primary deficit is $51,000 and fiscal deficit is $67000
Find a fiscal deficit if the primary deficit is 780 and the interest payment are 630!
G= Government spending Tax revenues Real GDP $160 $100 $500 $160 $120 $600 $160 $140 $700 $160 $160 $800 $160 $180 $900 a) If GDP is $600, while full-employment GDP is $700, how large is the current budget deficit? How large is the structural budget deficit? b) Is Averna's current fiscal policy expansionary or contractionary? How can you tell? What would you expect to happen to GDP over the long run?
(b) Assume a country's nominal deficit is $14 billion and its debt is $29 billion. If the inflation in the country is at an extent of 7%, calculate the real deficit in that country. Show your calculations.
(b) Malaysia's fiscal deficit to rise to level seen during global financial crisis KUALA LUMPUR - Malaysia's fiscal deficit for 2021 should hit a level similar to that seen during the global financial crisis more than a decade ago, according to the government's first-ever pre-budget statement. Released on Tuesday (Aug 31), the country's Independence Day, the pre-budget statement showed the fiscal deficit reaching between 6.5 per cent and 7 per cent for 2021, higher than the 5.4 per cent initially estimated. The deficit reached 6.7 per cent during the 2008-2009 global financial crisis. Malaysia's economy has been battered since a budget projection was first made late last year, with the country beset by surging Covid-19 infections and repeated lockdowns for much of the year. Analyze the impact of the government budget deficit on Malaysia's open economy. Include a three-panel diagram, the market for loanable funds, net capital outflow and the market for foreign currency exchange to…
29) When private expenditures decrease as a result of increased government 29) spending, this is known as A) the crowding out effect. B) government deficit spending. C) the stabilizer effect. D) the multiplier effect. 30) If other factors are held constant, what happens when the federal government finances a growing budget deficit by increasing the amount it borrows from the private sector? A) There will be an increase in the interest rate. B) There will be an increase in net exports. C) The crowding out effect will be cancelled out. D) There will be a decrease in the interest rate. 31) If the government began providing free textbooks to college students who would otherwise have bought their books from the private sector, the government's action would result in A) an increase in real Gross Domestic Product (GDP). B) a reduction of the government deficit. C) a Ricardian dilemma. D) a direct expenditure offset. 32) Supply-side economics focuses on tax cuts to stimulate A) government…
As per the government budget, the interest payments are estimated at $10,000 which is 40% of the primary deficit Calculate fiscal deficit
One objection to deficit spending is that it increases the demand for loanable funds thereby putting upward pressure on interest rates that crowds out private investment spending thereby lowering future U.S. growth. (1) What is the general level of interest rates in 2020?
(a) Assuming an economy is experiencing inflation, what are discretionary fiscal policy options that can be utilized by the government to address the situation? (b) Assuming an economy is in a recession, what are discretionary fiscal policy options that can be utilized by the government to move the economy out of the recession? (c) What is the difference between discretionary fiscal policy options and automatic stabilizers and explain how automatic stabilizers can be applied in an inflationary economy and a recessionary economy.