ECONOMICS W/CONNECT+20 >C<
20th Edition
ISBN: 9781259714993
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 5, Problem 5DQ
To determine
The political incentives to approve the budget deficit.
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If the government deficit/GDP ratio remains constant at 6% a year, the real GDP growth rate is 4% a year and the real interest
rate is 1%, the public debt/GDP ratio will converge to the equilibrium level at
O 210%
O 305%
O 208%
O 368%
9. True or false? If the statement is false, explain why: LO4
a. An internally held public debt is like a debt of the left hand owed to the right hand.
b. The Federal Reserve and federal government agencies hold more than half the public debt.
c. As a percentage of GDP, the federal debt held by the public was smaller in 2010 than it was in 1990.
d. As a percentage of GDP, the total U.S. public debt is the highest such debt among the world’s advanced industrial nations.
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- 5arrow_forwardIf the real interest rate on government bonds is three percent, real GDP grows at one percent, the current debt-to-GDP ratio is forty percent and the primary budget deficit as a percentage of GDP is two percent, then the debt-to-GDP ratio will rise in a year by. percentage points. O a. 0.28 O b. 0.82 O c. 2.8 O d. 8.2 O e. 82arrow_forward4arrow_forward
- Which of the following is true? O A) budget deficit is an accumulation of all prior budget national debts B) budget deficit is an accumulation of all prior budget national debts minus national surpluses OO budget deficit and national debt are the same thing. D) national debt is an accumulation of all prior budget deficits minus budget surplusesarrow_forwardQuestion 8 Year 1 2 3 4 5 Government Government tax revenues expenditures (billions of dollars) 240 250 260 300 325 O 50 What is the amount of the surplus or deficit incurred in year 5 by the government shown in the above table?. O $15 billion deficit O $15 billion surplus (billions of dollars) 240 245 255 320 340 O $5 billion surplusarrow_forwardWhich of the following is correct? 1) Expansionary fiscal policy during a recession means cutting taxes, increasing government spending, or taking both actions. 2) The goal of expansionary fiscal policy is to rein in inflation. 3) Expansionary fiscal policy tends to lead to a smaller budget deficit. O 4) Expansionary fiscal policy is always better than contractionary fiscal policy for 4) the economy.arrow_forward
- Suppose that the debt-to-GDP ratio is 0.53, the real interest rate on the debt is 6%, and the growth rate of real GDP is 3%. What is the maximum primary deficit or surplus (as a percentage of GDP) that the government can run and not increase the debt-to-GDP ratio? O A. 1.59% surplus O B. 1.59% deficit OC. 3.18% surplus O D. 3.18% deficitarrow_forwardTable 27-1 Y- C+I-G C- s00 - 0.S(Y – T) I- 300 G- 700 T- 0.25Y Table 27-1 Y= C+I+G C- 500 - 0.S(Y-T) I- 300 G- 700 T- 0.25Y Refer to Table 27-1. What is the level of tax revenues in this model? O a. 437.5 O 0. 1,000 OC 945.5 O0.937.5 O e.950arrow_forward25) The graph above shows the market for a one-year discount bond with a face value of $1,000. The government's budget deficit increases by $150 million and to finance that deficit it borrows in this market. This will result in the private-sector borrowing to be crowded out by X dollars. What is the value of X? O. 50 O. 100 O. 150 O. 200 26). The graph above shows the market for a one year discount bond with a face value of $1,000. The government's budget deficit increases by $150 million and to finance that deficit it borrows in this market. This results in the private-sector borrowing to be crowded out. At the end, the private sector will end up borrowing X dollars. What is the value of X? O. 50 O. 100 O. 150 O. 200 O. 250arrow_forward
- If the tax code exempts the first $20,000 of income from taxation and then taxes 25 percent of all income above that level, then a person who earns percent and a marginal tax rate of $50,000 has an average tax rate of percent. O 15, 25 O 25, 15 O 25, 30 O 30, 25arrow_forwardWhich of the following statements is correct? Choose an answer: O 1. Regardless of which side of the market the tax is levied on, the more inelastic side of the market bears the higher tax burden. O 2. If the supply is more elastic than the demand, then the suppliers bear the greater tax burden than the buyers. 3. The tax burden is incurred on the side of the market where the tax is levied. O 4. The tax burden is always borne half by the supplier and half by the customer. O 5. If the demand is more inelastic than the supply, then the providers bear the greater tax burden than the buyers. O00arrow_forwardSuppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, all citizens must pay 10 percent in taxes on their first $10,000 in earnings and then 50 percent in taxes on anything else they might earn. Given that George earned $20,000 last year, his marginal tax rate on the last dollar he earns will be rate for his entire income will be and his average tax O 10 percent; 50 percent O 50 percent; less than 50 percent O 10 percent; less than 50 percent O 50 percent; 50 percentarrow_forward
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