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 $ 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 S billion. billion, the amount of new debt issued is S billion, and the new national debt

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 $ 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 S billion. billion, the amount of new debt issued is S billion, and the new national debt

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.
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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.
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Please Read the Following Paragraph and Answer the Following Questions Oman’s government will finance most of its budget shortfall in 2021 by borrowing to plug a fiscal gap battered by a decline in oil prices and the coronavirus pandemic. The Persian Gulf state is looking into borrowing that will cover 73%, or 1.6 billion rials ($4.2 billion), of the country’s 2.2 billion-rial shortfall, with the remaining 600 million rials to be drawn from its reserves, according to a post on Twitter by the state-run Oman News Agency on Friday. The government based its 2021 budget plan on an oil price of $45 per barrel. Other highlights from Oman’s 2021 budget: • Expenditure is set to fall to 10.8 billion rials, a 14% drop from the previous year. • 2021 revenue is set to fall to 8.6 billion rials, a 19% decline. • Budget deficit at 8% of gross domestic product in 2021, 2.2 billion rials. Oman has taken measures such as reduced spending and plans to impose a 5% value-added tax in 2021. It…
Suppose potential GDP is $20 trillion. If the economy produces at potential, then the government budget deficit is $1 trillion. If actual GDP is $19 trillion, the government deficit is $1.25 trillion. The cyclically adjusted budget deficit is trillion (do not enter a '$' sign)
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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.
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Suppose the federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluses of $35 billion in year 3 and $50 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years the federal governments public debt would have A.) increased by $5 Billion B) increased by $90 billion C.) decreased by $85 billion D) decreased by $5 billion