In 2019, the U.S. government’s total debt reached $21.2 trillion, approximately equal to 105.3% of GDP. At the time, according to the U.S. Treasury, the average interest rate paid by the government on its debt was 1.3%.At what rate would nominal GDP have to grow in order for the debt-to-GDP ratio to remain unchanged when the deficit in 2020 is $600 billion? Answer with detailed workings.

In 2019, the U.S. government’s total debt reached $21.2 trillion, approximately equal to 105.3% of GDP. At the time, according to the U.S. Treasury, the average interest rate paid by the government on its debt was 1.3%.At what rate would nominal GDP have to grow in order for the debt-to-GDP ratio to remain unchanged when the deficit in 2020 is $600 billion? Answer with detailed workings.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 2P

See similar textbooks

Similar questions

The following describes some key variables regarding public debt in the UK. Debt to output is 95%, the growth rate of output is 1.2%, and the interest rate on debt is 1.5%. a) What is the primary surplus the government has to run as a percentage of output to ensure a stable debt to output ratio if there is no seigniorage from printing money? b) How would your answer change if you know that the increase in real money balances as a percentage of output is 0.8% per year? c) Assuming, again, no seigniorage what is the primary surplus the government needs to run to ensure that the level of government debt is constant? d) Explain briefly what the concept of "cyclically adjusted budget deficit" is and why is it relevant?
Fact: America's national debt stands at $17 trillion. That's a tough number to grasp. Most people will never come close to making $1 million in any given year. How can we understand the magnitude of the hole our country is in? Well, imagine you owed your credit card company $200,000. How much is the current debt?What is the impact of total government spending during the pandemic on current debt? Is government spending on the pandemic fiscal or monetary policy? Give 2 reasons why you think government spending for the pandemic is fiscal or monetary policy. At least one paragraph and cite any sources in APA format.
Suppose that in 2016 the federal government spent $730 billion and collected $480 billion in taxes while in 2017, government spending fell to $680 billion and government revenue increased to $780 billion. If the government debt was $5 trillion at the beginning of 2016, what will it be at the end of 2017?
In the fiscal year 2019, the projected U.S. federal government deficit totaled $960 billion, which is 23.2 percent higher than a year earlier. Given the information in the news clip, what was the total change in U.S. national debt during the fiscal years 2018 and 2019?
2. Calculating the debt to GDP ratio Suppose the following statistics characterize the financial health of the hypothetical economy Splurgium at the end of 2017: • Gross domestic product (GDP) is equal to $150 billion. • The national debt is equal to $225 billion. • The government has a budget deficit of $9 billion. • The debt ceiling in Splurgium is set at $248 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.
Consider the following economy. Government Debt, end of 2026: 400 Nominal interest rate on government debt: 2.0% 2027 inflation rate: 5% 2027 nominal GDP: 1000 Tax rate: 25% 2027 Government Expenditures: 368 2027 Net Government Transfers: 248 What is the government's debt at the end of 2027? (Round to one decimal place and do not enter the $ sign. If your answer is $6.14, enter 6.1. If your answer is $6.15, enter 6.2. If appropriate, remember to enter the - sign.)
A government starts off with a total debt of $2.0 billion. In year one, the government runs a deficit of $200 million. In year two, the government runs a deficit of $1 billion. In year three, the government runs a surplus of $800 million. What is the total debt of the government at the end of year three?
In which of the following cases does the size of the government’s debt and deficit indicate potential problems for the economy? Explain your answer. a) The government’s debt is relatively low, but the government is running a large budget deficit as it builds a high-speed rail system to connect the major cities of the nation. b) The government’s debt is relatively high due to a recently ended deficit-financed war, but the government is now running only a small budget deficit. c) The government’s debt is relatively low, but the government is running a budget deficit to finance the interest payments on the debt. 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.
The imaginary country of Acordia lists the following projected revenues and outlays for 2020: $30 million in personal income tax, $20 million in corporate income tax, $7 million in indirect taxes, $2 million in investment income, $35 million in transfer payments, $14 million in government expenditures, and $4 million in debt interest. What is the projected budget surplus (or deficit) for 2021? Calculate the amount and indicate whether it is a surplus or deficit.
A country has a rate of growth (g) of 0.75 %, a debt-to-income of 94% and a primary deficit of 0.9% of output. In response to a stimulus package, the debt-to- income ratio rises to 104% which causes an increase in the interest rate from 2.9% to 7.9%The impact to the change in the debt ratio over time is % (Enter your response rounded to two decimal places.)|
Let’s assume that in 2017, Sweden’s government had no debt and held $120 billion dollars. To stimulate its economy during 2018, the government of Sweden decides to spend $65 billion more than it will receive in tax revenue and in 2019, the government of Sweden’s expenditures will exceed tax revenues by $75 billion. What will the government of Sweden’s total debt equal at the end of 2019? Group of answer choices $20 billion $120 billion $140 billion $260 billion
The U.S. debt is $28.9 trillion as of Nov. 6, 2021. and each citizen's share of this debt is over $86,939 considering the population of about 330 million.(https://www.usdebtclock.org/) Even our national debt has continued to increase an average of over $2 billion per day since September 30, 2012, and currently US federal debt to GDP ratio reached 128.12% in the middle of COVID-19 pandemic. What do you think about the public debt in the U.S.? Do you think it is a myth to overly concern about the debt? Or, would it be a significant problem for our future generations as well as current generation? Discuss.