Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 30, Problem 3SCQ
Is it possible for a nation to run budget deficits and still have its debt
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Is it possible for a nation to run budget deficits and still have its debt/GDP ratio fall? Explain your answer. Is it possible for a nation to run budget surpluses and still have its debt/GDP ratio rise? Explain your answer.
In which of the following cases does the size of the government’s debt and deficit indicate potential problems for the economy? Explain your answer.
a) The government’s debt is relatively low, but the government is running a large budget deficit as it builds a high-speed rail system to connect the major cities of the nation.
b) The government’s debt is relatively high due to a recently ended deficit-financed war, but the government is now running only a small budget deficit.
c) The government’s debt is relatively low, but the government is running a budget deficit to finance the interest payments on the debt.
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Answer completely.
You will get up vote for sure.
The table shows the tax revenues and the outlays of a nation at each level of real GDP.
What is the budget deficit when real GDP is $4 trillion?
>>> When you are asked to report a deficit, it is reported as a positive number. If you are asked to report the budget balance, and that balance is a deficit, then it is reported as a negative number.
When real GDP is $4 trillion, the budget deficit is
$nothing
trillion.
>>> Answer to 1 decimal place.
Real GDP
Tax revenues
Outlays
(trillions of dollars)
3
0.1
0.5
4
0.2
0.4
5
0.3
0.3
6
0.4
0.2
7
0.5
0.1
Chapter 30 Solutions
Principles of Economics 2e
Ch. 30 - When governments run budget deficits, how do they...Ch. 30 - When governments run budget surpluses, what is...Ch. 30 - Is it possible for a nation to run budget deficits...Ch. 30 - Suppose that gifts were taxed at a rate of 10 for...Ch. 30 - If an individual owns a corporation for which he...Ch. 30 - What taxes would an individual pay if he were...Ch. 30 - The social security tax is 6.2 on employees income...Ch. 30 - Debt has a certain self-reinforcing quality to it....Ch. 30 - True or False: Federal spending has grown...Ch. 30 - What is the main reason for employing...
Ch. 30 - What is the main reason for employing expansionary...Ch. 30 - In a recession, does the actual budget surplus or...Ch. 30 - What is the main advantage of automatic...Ch. 30 - Explain how automatic stabilizers work, both on...Ch. 30 - What would happen if expansionary fiscal policy...Ch. 30 - What would happen if contractionary fiscal policy...Ch. 30 - Do you think the typical time lag for fiscal...Ch. 30 - How would a balanced budget amendment affect a...Ch. 30 - How would a balanced budget amendment change the...Ch. 30 - Give some examples of changes in federal spending...Ch. 30 - Have the spending and taxes of the U.S. federal...Ch. 30 - What are the main categories of U.S. federal...Ch. 30 - What is the difference between a budget deficit, a...Ch. 30 - Have spending and taxes by state and local...Ch. 30 - What are the main categories of U.S. federal...Ch. 30 - What is the difference between a progressive tax,...Ch. 30 - What has been the general pattern of U.S. budget...Ch. 30 - What is the difference between a budget deficit...Ch. 30 - What is the difference between expansionary fiscal...Ch. 30 - Under what general macroeconomic circumstances...Ch. 30 - What is the difference between discretionary...Ch. 30 - Why do automatic stabilizers function...Ch. 30 - What is the standardized employment budget?Ch. 30 - What are some practical weaknesses of...Ch. 30 - What are some of the arguments for and against a...Ch. 30 - Why is government spending typically measured as a...Ch. 30 - Why are expenditures such as crime prevention and...Ch. 30 - Why is spending by the U.S. government on...Ch. 30 - Excise taxes on tobacco and alcohol and state...Ch. 30 - What is the benefit of having state and local...Ch. 30 - In a booming economy, is the federal government...Ch. 30 - Economist Arthur Laffer famously pointed out that,...Ch. 30 - Is it possible for a nation to run budget deficits...Ch. 30 - How will cuts in state budget spending affect...Ch. 30 - Is expansionary fiscal policy more attractive to...Ch. 30 - Is Medicaid (federal government aid to low-income...Ch. 30 - What is a potential problem with a temporary tax...Ch. 30 - If the government gives a 300 tax cut to everyone...Ch. 30 - Do you agree or disagree with this statement: It...Ch. 30 - During the Great Recession of 20082009, what...Ch. 30 - A government starts off with a total debt of $3.5...Ch. 30 - If a government runs a budget deficit of 10...Ch. 30 - Specify whether expansionary or contractionary...
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Similar questions
- Complete the following sentence. As it relates to fiscal policy, a budget deficit exists when:Choose one answer. the government receipts are greater than its expenditures. the government expenditures are greater than its receipts. the government expenditures are equal to its receipts. the national debt is less than the yearly revenue.arrow_forwardIf a government runs a budget deficit of $10billion dollars each year for ten years, then a surplus of $1 billion for five years, and then a balanced budget for another ten years, what is the government debt?arrow_forwardDefine the budget deficit.arrow_forward
- 20 Lilliput is a country that has closed borders and does not import or export any goods or services; hence, they do not worry about trade with other countries. Total spending for the federal government of Lilliput for the last fiscal year was $24.19 billion. The country collected $22.9 billion in taxes during this same fiscal year. Assume government transfers were zero. Based on this information, what is Lilliput's budget balance? Enter your answer to two decimal places. budget balance: $ In the last fiscal year, Lilliput was running a budget surplus a budget deficit a balanced budget billionarrow_forwardIf Canada's primary budget deficit is negative, then Canada's debt will be ___________ next year.arrow_forwardWhat budget changes would have to occur in order to lower an annual deficit? Annual expenditures would have to rise. Annual expenditures would have to decline and annual tax collections would have to rise. Annual tax collections would have to fall. Annual expenditures would have to rise and annual tax collections would have to fall.arrow_forward
- The Effects of Fiscal Deficits on an Economy.arrow_forwardHow and why would joint budget resolutions be effective at influencing budget reforms and reducing deficits?arrow_forwardIs it possible for a country to have a headline fiscal deficit and a primary fiscal surplus? Explain your reasoningarrow_forward
- Excuse me, Dr. Tax, but that position makes little sense. First of all, let me say that this administration’s tax cuts and spending cuts have been and are grossly unfair. The tax cuts have favored the rich, and the spending cuts have reduced programs that help maintain economic security for Americans with low incomes. The present deficit-and the deficits projected for the future-are so large that they threaten our recovery from the recession. Here’s why: All deficits must be paid for by government borrowing, and because the government is borrowing so much money, there is less available for consumers and businesses. With government borrowing now threatening to increase, interest rates will rise and this will reduce spending for houses and cars and, in fact, spending on anything bought with a loan, as well as a business investment that must be financed by borrowing. In other words, some important private borrowing will be crowded out. Sometime next year, the recovery will therefore…arrow_forwardDuring difficult economic times, why are uniform across-the-board budget cuts poor fiscal policy?arrow_forwardAnalyse the various policy measures that a government might have to undertake to deal with and finance a growing fiscal deficit.arrow_forward
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