Principles of Macroeconomics 2e
2nd Edition
ISBN: 9781947172388
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 17, Problem 1SCQ
When governments run budget deficits, how do they make up the differences between tax revenue and spending?
Expert Solution & Answer
To determine
The sources of making up difference in the tax revenue and spending when government runs budget deficit.
Answer to Problem 1SCQ
When the government runs budget deficit, it is made up through internal and external borrowings.
Explanation of Solution
Budget deficit is the difference between the expenditure of the government and the government’s tax revenue. When the government runs budget deficit, it is met through borrowings from internal and external sources. Internal borrowings are public debt i.e. when the government issues T-bills, bonds, etc. in the internal market, it is internal borrowing. When the government borrows from other countries (or from the international market), it is external borrowing.
Thus, when the government runs budget deficit, it is made up through internal and external borrowings.
Economics Concept Introduction
Budget deficit: When the government tax revenue falls short of the government expenditure in a year, the government is said to run a budget deficit. The formula to calculate budget deficit is:
Budget Deficit =
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Chapter 17 Solutions
Principles of Macroeconomics 2e
Ch. 17 - When governments run budget deficits, how do they...Ch. 17 - When governments run budget surpluses, what is...Ch. 17 - Is it possible for a nation to run budget deficits...Ch. 17 - Suppose that gifts were taxed at a rate of 10 for...Ch. 17 - If an individual owns a corporation for which he...Ch. 17 - What taxes would an individual pay if he were...Ch. 17 - The social security tax is 6.2 on employees income...Ch. 17 - Debt has a certain self-reinforcing quality to it....Ch. 17 - True or False: Federal spending has grown...Ch. 17 - What is the main reason for employing...
Ch. 17 - What is the main reason for employing expansionary...Ch. 17 - In a recession, does the actual budget surplus or...Ch. 17 - What is the main advantage of automatic...Ch. 17 - Explain how automatic stabilizers work, both on...Ch. 17 - What would happen if expansionary fiscal policy...Ch. 17 - What would happen if contractionary fiscal policy...Ch. 17 - Do you think the typical time lag for fiscal...Ch. 17 - How would a balanced budget amendment affect a...Ch. 17 - How would a balanced budget amendment change the...Ch. 17 - Give some examples of changes in federal spending...Ch. 17 - Have the spending and taxes of the U.S. federal...Ch. 17 - What are the main categories of U.S. federal...Ch. 17 - What is the difference between a budget deficit, a...Ch. 17 - Have spending and taxes by state and local...Ch. 17 - What are the main categories of U.S. federal...Ch. 17 - What is the difference between a progressive tax,...Ch. 17 - What has been the general pattern of U.S. budget...Ch. 17 - What is the difference between a budget deficit...Ch. 17 - What is the difference between expansionary fiscal...Ch. 17 - Under what general macroeconomic circumstances...Ch. 17 - What is the difference between discretionary...Ch. 17 - Why do automatic stabilizers function...Ch. 17 - What is the standardized employment budget?Ch. 17 - What are some practical weaknesses of...Ch. 17 - What are some of the arguments for and against a...Ch. 17 - Why is government spending typically measured as a...Ch. 17 - Why are expenditures such as crime prevention and...Ch. 17 - Why is spending by the U.S. government on...Ch. 17 - Excise taxes on tobacco and alcohol and state...Ch. 17 - What is the benefit of having state and local...Ch. 17 - In a booming economy, is the federal government...Ch. 17 - Economist Arthur Laffer famously pointed out that,...Ch. 17 - Is it possible for a nation to run budget deficits...Ch. 17 - How will cuts in state budget spending affect...Ch. 17 - Is expansionary fiscal policy more attractive to...Ch. 17 - Is Medicaid (federal government aid to low-income...Ch. 17 - What is a potential problem with a temporary tax...Ch. 17 - If the government gives a 300 tax cut to everyone...Ch. 17 - Do you agree or disagree with this statement: It...Ch. 17 - During the Great Recession of 20082009, what...Ch. 17 - A government starts off with a total debt of $3.5...Ch. 17 - If a government runs a budget deficit of 10...Ch. 17 - Specify whether expansionary or contractionary...
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