a real GrOSS Dom stic OT Ș18.4 billloh. 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)

a real GrOSS Dom stic OT Ș18.4 billloh. 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)

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 2.9P

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Similar questions

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(a) Assume Consumption (C) is given by the equation C = 500 + 0.6(Y – T). Taxes (T) are equal to 600. Government spending is equal to 1,000. Investment is given by the equation I = 2,160 – 100r, where r = the real interest rate = 13 percent. In this case, what is the equilibrium Gross Domestic Product (GDP)/Total output (Y)/Total income? How does the equilibrium income change if government designs and executes expansionary fiscal policy? Show graphically and mathematically.
'The U.S., world's largest economy, went into recession in February of 2020. It has taken a broad range of steps to combat the economic disruption caused by COVID-19. In response to this crisis, governments have enacted sweeping and sizable fiscal stimulus of trillions of dollars.' Is it an appropriate policy response if the primary responsibility of the government is to maintain economic growth? Explain the significance of Fiscal policy for an economy? Is there any difference in the two approaches of fiscal expansion through - direct transfer benefit and government spending directly on purchase of goods and services that may influence real GDP? What role does multiplier play? Explicate. Support your answer with the suitable diagram/s.
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Given thatG= 201= 35C = 0.9Ya + 70T= 0.2Y + 25Where, G, I, C, T and Ya are planned government expenditure and planned investment autonomous andconsumption expenditure and tax respectively.Calculate the equilibrium level of national income.
There is a consumer who lives for two periods. Her income is given by Y1 and Y2. She has access to the credit marketwith the interest rate r. The government collects lump-sum taxes T1 >0 and T2 >0. The government can run asurplus or a deficit, but must borrow (or save) in the credit market at the interest rate r, same as the consumer.1. Write down the government intertemporal budget constraint. Note that the government also has the accessto the credit market. Write down the consumer’s budget constraint. Show the consumption choicegraphically.2. Imagine that the government decreases the taxes in period 1 and raises tax in period 2 to pay back any debtand interest from the previous period. This is anticipated by consumers. Show the new consumption choice.How does that compare to the result from the previous section.3. Assume that the government is not constraint by the balanced budget and can have deficit in both periods.Now the government is being generous and pays transfers T1…