ECON MACRO
5th Edition
ISBN: 9781337000529
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 12, Problem 3.8P
Sub-part
A
To determine
the way in which the national debt is related to the government’s budget deficit. When the gross national debt is $3 trillion and the government’s budget deficit is $300 billion.
Concept Introduction:A budget is an estimation of revenue and expenses over a specified future period of time. A budget deficit occurs when expenses exceed revenue, and it is an indicator of financial health. To correct a budget deficit, a nation may need to cut back on certain expenditures, increase revenue-generating activities or employ a combination of the two.
Sub-Part
B
To determine
the way in which the national debt is related to the government’s budget deficit. When the gross national debt is $2.5 trillion and the government’s budget deficit is $100 billion.
Concept Introduction:A budget is an estimation of revenue and expenses over a specified future period of time. A budget deficit occurs when expenses exceed revenue, and it is an indicator of financial health. To correct a budget deficit, a nation may need to cut back on certain expenditures, increase revenue-generating activities or employ a combination of the two.
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Question 3.
The nominal budget deficit of the government sector is -5% and the structural budget deficit is -1%. Analyze what these numbers say about the economy and the government's fiscal policy.?
(11) The fiscal balance is the difference between
exports and imports.
government expenditure and revenue.
production and consumption.
savings and investment.
lending and borrowing.
(12) What is the effect of a fall in domestic savings on the rate of interest and the level of investment?
Neither the interest rate nor the level of investment change.
The interest rate rises and the level of investment falls.
The interest rate and the level of investment both fall.
The interest rate and the level of investment both rise.
The interest rate falls and the level of investment rises.
(13) The real exchange rate is defined as the amount of (local, foreign) (currency, products) required to exchange for a given amount of (local, foreign) (currency, products).
local currency; foreign currency.
foreign currency; local currency.
local products; foreign currency.
local products; foreign products.
local currency; foreign products.
(10) Over the last two decades, nominal salaries in Jamaica…
(The National Debt) Try the following exercises to better understand
how the national debt is related to the government's budget deficit. a. Assume that the gross national debt initially is equal to $3 trillion and the federal government then runs a deficit of $300 billion:
i. What is the new level of gross national debt?
ii. If 100 percent of the deficit is financed by the sale of securities to federal agencies, what happens to the amount of debt held by the public? What happens to the level of gross debt?
iii. If GDP increased by 5 percent in the same year that the deficit is run, what happens to gross debt as a percentage of GDP? What happens to the level of debt held by the public as a percentage of GDP?
b. 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:
i. What is the new level of gross national debt?
ii. If 100 percent of this deficit is financed by the sale of securities to the public,…
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