Question 27: Suppose that the primary deficit (G – T) is zero in the economy. Suppose further that the interest rate (r) is positive but it is smaller than the GDP growth rate (n). The government currently has a positive amount of debt (B > 0). Which of the following statements regarding the government debt is (are) correct? I. The amount of debt (B) does not change over time II. The debt-to-GDP ratio (b = B/Y) will converge to zero in the long-run

Question 27: Suppose that the primary deficit (G – T) is zero in the economy. Suppose further that the interest rate (r) is positive but it is smaller than the GDP growth rate (n). The government currently has a positive amount of debt (B > 0). Which of the following statements regarding the government debt is (are) correct? I. The amount of debt (B) does not change over time II. The debt-to-GDP ratio (b = B/Y) will converge to zero in the long-run

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Bangladesh has debt to GDP ratio 38.86 percent during 2020.During 2021 the budget components are listed in the table below: Budget components As % of GDP Total tax revenue 10.52 Total Expenditure 15.63 Total interest payment 1.35 Due to the COVID pandemic, nominal GDP growth has been decreased 13.83 percent in 2020 while average interest rate on public debt in 9.2 percent Given the information, construct the debt dynamic equation. Do you think that debt path will stable? Explain it through diagram Estimate the debt to GDP ratio numerically during 2021 and explain this change from 2020 to 2021. Estimate the steady state debt to GDP ratio in recent Bangladesh government decides to take expenditure fiscal policy. Do you think that steady state debt will be changed? Explain your answer.
A government has 15 trillion in debt (B). The real interest rate (r) is 6% . If the government spending on goods and services (G) during the year was 717 billion and taxes minus transfers (T) for the year was 592 billion , the change in government debt during the year was __ billion.
Year Government Purchases Government Taxes Real GDP 1 340 268 5,926 2 419 226 5,792 Suppose there is no public debt before Year 1 and that net transfers are equal to zero. What is the public debt as a percentage of GDP in Year 2? Answer this as a percentage and round your answer to two digits after the decimal without the percentage sign. ex. If you found the rate to be 5.125%, answer 5.13.
Suppose that the federal government had a budget deficit of $60 billion in year 1 and $70 billion in year 2, but that it experiences budget surpluses of $50 billion in year 3 and $10 billion in year 4. Also assume that the government uses any budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have decreased by $60 billion. decreased by $57.5 billion. increased by $60 billion. increased by $190 billion.
Short answer question (1) Define fiscal deficit
Question 5 • For a country with a given debt/GDP ratio at time t-1, if the growth rate of GDP was less than the real interest rate, to prevent the increase in this ratio would it be sufficient to not run a primary deficit at time t?
Question 3. The nominal budget deficit of the government sector is -5% and the structural budget deficit is -1%. Analyze what these numbers say about the economy and the government's fiscal policy.?
In year one government taxes are 590,000 and government spending is 600,000 in year two government taxes are 590,000 and government spending is 590,000 in year three government taxes are 630,000 and government spending is 600,000. What is the government deficit for year two and provide the size of the government debt or surplus at the end of all three year.
A government starts with a national debt of $3.5 billion. In year 1, the government runs a budget deficit of $400 million. In year 2, the government runs a budget deficit of $1 billion. In year 3, the government runs a budget surplus of $200 million. What is the government's national debt at the end of the third year?
A 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.
2) Transfer payments are the ________ in the government's budget. A) smallest expenditure source B) largest expenditure source C) smallest revenue source D) largest revenue source 3) Personal taxes are the ________ in the government's budget. A) smallest expenditure source B) largest expenditure source C) smallest revenue source D) largest revenue source 4) A government's debt is increased when it A) balances is budget. B) buys more bonds. C) runs a deficit. D) runs a surplus. 5) When a government runs a surplus A) its debt increases. B) it must raise taxes. C) its debt decreases. D) it must cut spending. 6) The amount the government owes to the public is the federal debt. 7) If tax receipts are greater than government expenditures the government is running a surplus. 8) If the government runs a surplus, then the government debt increases. 9) Transfer payments are the largest part of the U.S.…
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.)