Suppose you have an equation: C = $200 + 0.9Y Equilibrium output = $2,000, whereas full employment output = %3D $3,000. The desired change in the budget deficit to attain full employment is $100. O True O False
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- "Say whether following statement is True or False and Please provide a concise explanation of this as well as an explanation with a diagram, if its possible to do." 1. If a government runs a primary fiscal deficit, and has no source of additional revenue other than the inflation tax, hyperinflation is inevitable.Consider an economy in which the government wants to do tight (contractionary) fiscal policy by changing taxes by $4000. If the average citizen spends 80 percent of each dollar of income, what will be the total effect on output Y? Carefully follow all numeric directions. Use a negative number (with negative sign) to depict an increase in Y and a positive number (no sign) to depict a decrease.An effective expansionary fiscal policy will: Multiple Choice O always result in a balanced budget once full-employment is achieved. increase the full-employment deficit. reduce a full-employment deficit. Saved not change the size of full-employment deficit. 5
- 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)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?a) If the spending multiplier is 2.0 and the economy is in a $540 billion contractionary gap, how much should I increase government purchases to eliminate the gap? b) Continuing with a, if the MPC is 0.9, how much would I need to increase transfer payments to eliminate the $500 billion contractionary gap? c) Distinguish between deficit and debt.
- A. Differentiate between discretionary fiscal policy and nondiscretionary or built-in stabilization policy. B. When in a recession a government has the option to increase government spending or decrease taxes to stimulate the economy. Discuss which piece of GDP is being targeted when each is used.Assume the economy is operating below full employment. Which of the following policies will increase aggregate demand, but will not increase U.S. national debt? Increase government spending without changing tax rates. Increase government spending and increase taxes by the same amount. Decrease tax rates and leave government spending unchanged. Give everyone a $1,400 fiscal stimulus check and increase government spending by $1.9T.Suppose the government implements fiscal consolidation by cutting spending while the nominal interest rate is already at zero or near zero percent. Given πeequals to π ̅ , fiscal consolidation will likely lead to: a. Increasing inflation, decreasing real interest rate and a recession b. Increasing inflation and real interest rates, and a recession c. Deflation spiral, decreasing real interest rate and a recession d. Deflation spiral, increasing real interest rate and a recession e. All of the answers here are incorrect
- Assuming that the money demand function depends on income, the interest rate and the price level as presented in class, then if planned investment decreases as the interest rate increases, the size of the government spending multiplier for expansionary fiscal policy will be________ than it was when we ignored the money market. a)exactly the same b)larger c)smallerRelevant knowledge is important because it is important to understand that the federal budget deficit affects all aspects of the economy, but also the state of the economy affects the federal budget. Suppose that the federal budget is balanced when GDP is at potential GDP. If equilibrium GDP falls below potential, how and why would the budget change.Nigeria typically runs a gov budget surplus, and it has a small debt to GDP ratio (approximately 40%). This year, Nigeria is running a government budget deficit, and it is financing that deficit by selling government bonds.This year's government budget deficit is causing interest rates to (increase/decrease/remain the same/change ambiguously) and the debt to ( increase/decrease/remain the same/change ambiguously.) Nigeria is predicted to return to a surplus position next year. If it is successful, interest rates will (increase/decrease/remain the same/change ambiguously) and the debt will (increase/decrease/remain the same/change ambiguously.) In August 2019, Nigeria announced that it would increase its sale of government bonds from 55 billion nigerian currency to 85 billion nigerian currency. This resulted in (an increase, decrease, no change, an ambiguous change) in the price of government bonds and (an increase, decrease, no change, an ambiguous change) in the yield of government…
