Question 7: 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 (a) None of the above (b) I only (c) II only (d) Both I and II

Question 7: 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 (a) None of the above (b) I only (c) II only (d) Both I and II

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

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?
The government starts with a debt of $4 billion. In year one, the government runs a deficit of $600 million. In year two, the government runs a deficit of $1 billion. In year three, the government runs a surplus of $300 million. What is the total debt of the government at the end of year three? Show work.
Eastlandia's GDP in 2021 is $12494. Government budget deficit in 2021 is $63.7. Government debt at the end of 2020 is $907, on which it has to pay an interest rate of 3.1 percent. Government debt at the end of 2021 is $ Do not enter $ sign. Round to two decimal places if required.
Imagine a country where there is a $500 million debt with a real Gross Domestic Product of $18.4 billion. The debt service payments are $35 million with a 4% interest rate and the primary budget deficit for the upcoming year is expected to be $185 million and the economy is expected to grow by 2.5%. What is the current debt-to-GDP ratio and how much will that change given the new budget forecast? (show your work and the new debt-to-GDP ratio)
The government debt is None of these answers is correct. the total accumulation of deficits in the current period. the outstanding stock of bonds that have been issued in the past. equal to total tax receipts. the annual difference between government spending and tax revenues.
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?
For each of the descriptions below, decide whether it applies to a deficit, a surplus or the public debt. Deficit Surplus Public Debt Is calculated using factors The amount by which annual including treasury bills, notes, government revenues exceed expenditure. and bonds. Experienced by the U.S. federal government between 1998-2001, but rarely occurs in the modern American economy. Occurs when the cost of additional government programs exceed additional government income. The amount that government spending exceeds tax revenue.
The 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
SS#14-C- The National Debt (Sources: "Financing the National Debt," ch. 13 p. 348-349/357-358; "Debt Ceiling," ch. 13 p. 353/359-360) 13. If the federal government has a budget deficit in one fiscal year: a. the federal government must raise taxes to pay off the deficit. b. the federal government must either cut spending or raise taxes to pay off the deficit. C. the interest rate on U.S. government bonds must increase. d. the national debt will increase by the amount of the budget deficit. 14. The national debt is the: difference between a nation's exports and imports of goods and services sum of the personal debt of all citizens in the United States C. total amount owed by the federal government to owners of government securities d. difference between the government's revenues and expenditures in one fiscal year a. b. SS#14-D-The Debate over Deficits and the Debt (Sources: "Why Worry over the National Debt?" text ch. 13 p. 353-363/362-372; "Three Questions," p. 4 of SS#14) 15. Each…
What does a declining national debt indicate? Group of answer choices The government is receiving more money in taxes than it spends in a year. The government is spending more money than it receives in taxes for a given year. The unemployment rate is declining. The rate of inflation is declining.
Government debt in the United States can be categorized a number of different ways. For each debt definition, please indicate all of the scenarios which match that type of debt. The national debt includes Treasury bonds bought by First National Bank of Dallas. the government of China. the Social Security Administration. a citizen of Germany. a little old lady in Peoria. The public debt includes Treasury bonds bought by First National Bank of Dallas. the government of China. a citizen of Germany. a little old lady in Peoria. the Social Security Administration. Internally held debt includes bonds owned by the Social Security Administration. First National Bank of Dallas. the government of China. a citizen of Germany. a little old lady in Peoria. Externally held debt includes bonds owned by the Social Security Administration. First National Bank of Dallas. the government of China. a citizen of Germany. a little old lady in Peoria.