Assume that in the Atlantis the actual deficit is $200 billion. If the Atlantis were at full employment, the deficit would be $50 billion. The structural deficit in the Atlantis is $50 billion. $200 billion. O $150 billion. O $100 billion.
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- Explain how automatic stabilizers work, both on the taxation side and on the spending side, first in a situation where the economy is producing less than potential GDP and then in a situation where the economy Is producing more than potential GDP.Consider the often debated crowding-out and crowding-in concepts. Also consider expansionary fiscal policy with respect to increased government (deficit) spending. Describe how the two concepts are different. 2. Which concept do you think makes more sense during a recessionary period?Suppose a closed economy generates $2800 output and income in equilibrium. Suppose also that the government spends 350 and imposes a lump-sum tax of 50. By how much is the government in deficit? (round your answer to the nearest whole value)
- This problem gets at the question of whether a government can run a budget deficit forever. For a government to avoid defaulting on its debt, it has to ensure its Debt/GDP ratio doesn’t get too big. Assume that ratio is not too big in the US right now, even though it’s about 100%.a) US nominal GDP has been rising by about 4% in recent years. Assume that continues. How much can US government debt rise each year in percent and keep the Debt/GDP ratio constant? b) If US government debt equaled $23 trillion at the start of this year, how big of a budget deficit could the US government run in dollars this year and still keep its Debt/GDP ratio constant?Suppose the government's present value of current and projected future outlays is 75 percent of GDP and its present value of current and projected future revenues is 50 percent of GDP. What gap does this describe, and what is the size of the gap? This information describes the _______. A. fiscal gap, which is 25 percent of GDP B. generational gap, which is 25 percent of GDP C. fiscal gap, which is 125 percent of GDP D. fiscal gap, which is – 25 percent of GDPLet’s assume that in 2017, Sweden’s government had no debt and held $120 billion dollars. To stimulate its economy during 2018, the government of Sweden decides to spend $65 billion more than it will receive in tax revenue and in 2019, the government of Sweden’s expenditures will exceed tax revenues by $75 billion. What will the government of Sweden’s total debt equal at the end of 2019? Group of answer choices $20 billion $120 billion $140 billion $260 billion
- (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.A. Calculate the levels of consumption and savings that occurs when the economy is in equilibrium. B. Computer the government budget deficit in this economy. C. If government spending in banana land increases by $1000 what is the amount of the increase in equilibrium output? D. If taxes in banana land decrease by $1000 what is the new equilibrium output in this economy? E. To keep the government budget balanced, of both government spending and taxes in banana land increase by $1000 what is the change in equilibrium income level?What are some fiscal policies that might improve a society's human capital? (3pts) How would you expect larger budget deficits to affect a private sector investment in physical capital? (2pts) Why? (3pts)
- Now suppose that the gross national debt initially is equal to $2.5 trillion and the federal government then runs a deficit of $100 billion. What is the new level of gross national debt? If 100 percent of this deficit is financed by the sale of securities to the public, what happens to the level of debt held by the public? What happens to the level of gross debt? 3. If GDP increases by 6 percent in the same year as the deficit is run, what happens to the gross debt as a percentage of GDP? What happens to the level of debt held by the public as a percentage of GDP?1. If the marginal propensity to consume is 0.8 in an economy, a $20 billion rise in Incomes will do what to GDP? (Tell if it will increase or decrease GDP, and by how much.) 2. Suppose that the level of government spending increased by $100 billion where the marginal propensity to consume is 0.5. Aggregate expenditures must have increased by: 3. The Government has a $.8 Trillion Growth target. What fiscal policy should they implement if MPS = .2?a) Suppose that there are no crowding-out effects and the MPC is 0.8. By how much must the government increase expenditures shift the aggregate-demand curve right $10 billion? b. The model of Long-run Growth, proposes that fiscal policy can have lasting effects on savings, investment, and economic growth. On the other hand, the model of Aggregate Demand-Aggregate Supply suggests that the only long run effect of fiscal policy is an increase in the price level. How could you use the Aggregate Demand and Aggregate Supply model for a more accurate description of the short-run and long-run effects of an increase in government spending? Could you distinguish between different uses of government expenditures to predict their effects on prices and output?
