27. Let the government increase spending by 10$ with a money multiplier of 3. What is the total amount of debt? What is the total new income? Let the tax rate = 10%. How much of the new income comes back to the government? How much is added to the deficit? 28. Let potential income (X") 10$ Trillion and actual income (X^) = 9.8$ Trillion. What is the structural deficit in both trillions and billions of dollars? Let the tax rate = 10%. Identify the passive deficit and the actual deficit. Show your work!

27. Let the government increase spending by 10$ with a money multiplier of 3. What is the total amount of debt? What is the total new income? Let the tax rate = 10%. How much of the new income comes back to the government? How much is added to the deficit? 28. Let potential income (X") 10$ Trillion and actual income (X^) = 9.8$ Trillion. What is the structural deficit in both trillions and billions of dollars? Let the tax rate = 10%. Identify the passive deficit and the actual deficit. Show your work!

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 51P: A government starts off with a total debt of $3.5 billion. In year one, the government runs a...

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A government starts off with a total debt of $3.5 billion. In year one, the government runs a deficit of 400 million. In year two, the government runs a deficit of 1 billion. In year three, the government runs a surplus of 200 million. What is the total debt of the government at the end of year three?
Explain whether or not you agree with the premise of the Ricardian equivalence theory that rational people might reason: Well, a higher budget deficit (surplus) means that Im just going to owe more (less) taxes In the future to pay off all that government borrowing, so Ill start saving (spending) now. Why or why not?
The U.S. government has shut down a number of times In recent history Explain how a government shutdown will affect the variables In the national Investment and savings identity Could the shutdown affect the government budget deficit?
What is the main advantage of automatic stabilizers over discretionary fiscal policy?
What is the main reason for employing contractionary fiscal policy in a time of strong economic growth?
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.
Describe how a plan for reducing the government deficit might affect a college student, a young professional, and a middle-income family.
What must take place for the government to run deficits without any crowding out?
In a booming economy, is the federal government more likely to run surpluses or deficits? What are the various factors at play?