Q-5) Government debt is a major issue in macroeconomic policy debate. Explain why the nominal deficit reporting is flawed in the time of high inflation ?
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- Question 27 One hypothesis for the lack of success of the rapid fiscal expansion in Japan financed by increased borrowing in the 1990s to prevent a sharp economic downturn is: Ricardian equivalence. O a large number of discouraged workers. a sharply depreciated Japanese yen. rising expected inflation. O high nominal interest rates. A04. A "sovereign debt crisis" (a) Merely reduces the effectiveness of Keynesian policy. (b) Drastically limits the government's ability to borrow to finance expansionary Keynesian policy and thus makes such policy unavalable (c) May make a recession worse as governments implement austerity policies to reduce the debt and shore up lenders' confidence (d) All the above (e) Only (b) and (c) are true.An economy is in long-run macroeconomic equilibrium when each of the following aggregate demand shocks occurs. What kind of gap - inflationary or recessionary - will the economy face after the shock, and what type of fiscal policies would help move the economy back to potential output? How would your recommended fiscal policy shift the aggregate demandcurve? (Note: you do not need to draw anything).(a) A stock market boom increases the value of stocks held by households.(b) Firms come to believe that a recession in the near future is likely.(c) Anticipating the possibility of war, the government increases its purchases of military equipment.(d) The quantity of money in the economy declines and interest rates increase.
- Pls help with below homework. Is large debt a problem or not ? What is implication of having large debt ? Explain your answer with real life examples.7. Study Questions and Problems #7 Suppose the federal government has no national debt and spends $200 billion, while raising only $50 billion in taxes. To finance the deficit, the U.S. Treasury must issue S billion in government bonds. Next year, assume tax revenues remain at $50 billion, and government spending remains $200 billion plus the interest payment it makes on the government bonds issued to finance the deficit in the first year. If the government pays a 10% rate of interest, the debt-servicing interest payment that needs to be added to the government's $200 billion expenditure for goods and services in the second year is S billion. Then the deficit in the second year is S is $ billion. billion, the amount of new debt issued is 5 billion, and the new national debtOne of the problems with a growing national debt is the growing interest payments which must be paid on that debt. ture or false
- 1. Optimal fiscal policy relies on the (a) Friedman rule (b) Laffer curve (c) model's productivity shocks (d) Federal Reserve Bank 2. In the short-run, money (a) does not enter into the representative consumer's utility function. (b) is non-neutral (because prices are rigid/sticky, often for long periods of time). (c) is the equivalent of holding a "riskless asset." (d) is used as a proxy for the pricing kernel in the sequential Lagrangian analysis.K Because in the government budget deficit increase the real interest rate, budget deficits can O A. decreases; increase OB. increases; increase OC. decreases; decrease O D. increases; decrease firm investment. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism.Answer completely and accurate answer.Rest assured, you will receive an upvote if the answer is accurate.22.000 20,000 18,000 16,000- 14,000- 12,000 10,000 W000- 6000- 4000 2000- 0 Gross Federal Debe (billions of dollars) (b) 400 2001 0. -200 c) Who was president at that time? -400 -600- 7. How much is the deficit in 2022? -800- -1000- -1200- -1400- -1600 1. What is the difference between deficit and debt? 3. What years saw a very small increase in debt? 2. What is happening to the gross federal debt over time? 4. When did the debt start rising at a quicker pace? Surplus or Deficit (billions of dollars) Positive values are serpluses Negative values are deficits. 5. a) Between what years did the government see a surplus in their budget? b) How is that shown in the gross federal debt graph? (a) 6. a) What year saw the biggest deficit? b) Who was president in that year? c) How do you think he lowered the deficit over the next few years?
- 3. The economy of Country Zeta is in long-run equilibrium; however, the government is concerned about the size of the national debt. (a) Identify one specific fiscal policy action the government could take to reduce the national debt. (b) Draw a correctly labeled graph of the loanable funds market, and show the effect of the fiscal policy action identified in part (a) on the real interest rate. (c) Based on the change in the real interest rate identified in part (b), what will happen to each of the following? (i) Aggregate demand in the short run. Explain. (ii) Potential real output. Explain.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________________________ making a series of future expenditures without simultaneously committing to collect enough tax revenues to pay for those expenditures. a. Budget deficits b. Debt crises c. Loan guarantees d. Unfunded liabilities
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