EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 31, Problem 5P
To determine
Cyclically adjusted budget deficit.
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Students have asked these similar questions
Which of the following is correct?
1) Expansionary fiscal policy during a recession means cutting taxes, increasing
government spending, or taking both actions.
2) The goal of expansionary fiscal policy is to rein in inflation.
3) Expansionary fiscal policy tends to lead to a smaller budget deficit.
O 4) Expansionary fiscal policy is always better than contractionary fiscal policy for
4)
the economy.
Suppose that a family's income is exactly the same as the poverty threshold.
This family's income deficit would be
and their ratio of income to poverty would be
O 0; 1
0 ; 0
1;0
O 1;1
Consider a family of four in 2008, whose poverty threshold is $22,024. If this family's total income was $12394, what
would their income deficit be?
income deficit: $
If the real interest rate on government bonds is three percent, real GDP grows at one percent, the current debt-to-GDP ratio is forty percent and the primary
budget deficit as a percentage of GDP is two percent, then the debt-to-GDP ratio will rise in a year by.
percentage points.
O a. 0.28
O b. 0.82
O c. 2.8
O d. 8.2
O e. 82
Chapter 31 Solutions
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- 13. Which fiscal policy would make a budget surplus larger or a budget deficit smaller? O lower taxes O increase in government purchases of goods and services O lower government transfers O higher interest ratesarrow_forwardSuppose that the investment demand curve in a certain economy is such that investment declines by $110 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $190 billion at each real interest rate for every 1 percentage point increase in the expected rate of return from investment. If stimulus spending (an expansionary fiscal policy) by government increases the real interest rate by 2 percentage points, but also raises the expected rate of return on investment by 1 percentage point, how much investment, if any, will be crowded out? Instructions: Enter your answer as a whole number. billion %24arrow_forwardSuppose that the investment demand curve in a certain economy is such that investment declines by $110 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $170 billion at each real interest rate for every 1 percentage point increase in the expected rate of return from investment. If stimulus spending (an expansionary fiscal policy) by government increases the real interest rate by 2 percentage points, but also raises the expected rate of return on investment by 1 percentage point, how much investment, if any, will be crowded out? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- 5. Refer to the table. The changes in the budget conditions between 1998 and 1999 best reflect: Actual budget, Full-employment budget, percent of GDP (- deficits; + surpluses) (- deficits; + surpluses) percent of GDP Year 1998 0. 1999 -3 2000 -5 2001 - 2 - 2 2002 +2 +1 an expansionary fiscal policy. a contractionary fiscal policy. a recession. demand-pull inflation. 0 022arrow_forwardIf the government deficit/GDP ratio remains constant at 6% a year, the real GDP growth rate is 4% a year and the real interest rate is 1%, the public debt/GDP ratio will converge to the equilibrium level at O 210% O 305% O 208% O 368%arrow_forwardQuestion 16 The country of Opulencia loves to live large, but has a major debt problem. It has a national debt of $800 billion, $400 billion in intergovernmental borrowing, $160 billion in bonds held by domestic citizens, and $240 billion in bonds held by foreign citizens. Opulencia's public debt is equal to: O $400 billion O $640 billion O $960 billion O $1,200 billionarrow_forward
- QUESTION 16 If the marginal propensity to save is 0.1, the marginal propensity to import is 0.1 and the marginal tax rate is 0.2, how much would consumption increase if income rises by £8billion? O a. 4.8 O b. 13.3 O c. 3.2 O d. 20 4arrow_forwardSuppose the government's objective is to hold its debt-to-GDP ratio constant at its current level of 30 percent. If the real interest rate on government bonds is four percent and the growth rate of real GDP is two percent, then the government must run... O a A primary budget surplus of 0.6 percent of GDP. O b. A primary budget 'deficit of 0.6 percent of GDP. O c. An overall budget deficit of 6.0 percent of GDP O d. An overall budget surplus of 6.0 percent of GDP O e. A balanced budget.arrow_forwardConsider the following data about government debt and deficit in a given year - real interest rate on government bonds = 1% -growth rate of real GDP = 1% - current debt-to-GDP ratio = 25% - primary budget deficit as a percentage of GDP = 2% Over this one-year period the debt-to-GDP ratio will have O A. risen by 0.2 percentage points. OB. remained unchanged. OC. risen by 2 percentage points. OD. fallen by 2 percentage points. O E. fallen by 0.2 percentage points.arrow_forward
- Consider an economy that has the following GDP and price levels if there was no fiscal policy: Year 1 2 3 Potential real GDP $18 trillion $18.2 trillion $18.7 trillion Actual real GDP $18 trillion $18.3 trillion $18.5 trillion Price level 175 182 187 What should the government do if it wants the real GDP at its potential level in year 1 and there were no fiscal policy lags? Choose one: O A. recommend an expansionary fiscal policy B. recommend a contractionary fiscal policy O C. no change is necessary See Hintarrow_forwardWe would expect Canada's cyclical deficit or surplus to equal zero when Select one: O A. the primary budget deficit is zero. O B. the government is not reporting all of its expenses. O C. the overall government budget is balanced. O D. the debt-to-GDP ratio is stable. O E. the economy is at full employment.arrow_forwardThe figure shows government expenditure and revenue as a percentage of GDP, 1990-2019. During which of the following periods did the federal government run a budget surplus? 27.0% 25.0% -Expenditures 23.0% 21.0% 19.0% Receipts 17.0% 15.0% YEAR O 1998-2001 None of these answers is correct. O 2003-2008 2012-2018 PERCENT OF GDP 0661 1991 1993 1994 9661 2661 6661 0007 2002 2003 2005 9007 2008 6007 2011 2012 2014 2015 2017 2018arrow_forward
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