Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 33, Problem 6P
To determine
Fourth year real GDP .
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Suppose an economy has a GDP of $40 billion and a national debt of $20 billion, and the average interest rate on this debt is currently 3%.
Calculate the annual interest payments on the debt.
What percentage of this economy’s GDP is spent on interest payments on its debt?
Suppose that next year, one of two events occurs: (1) GDP and interest rates stay the same, but the economy adds $4 billion to its national debt, or (2) GDP and the national debt stay the same, but the average interest rate on the debt increases to 4%. Which of the two events will result in a larger portion of the economy’s GDP going toward interest payments on the national debt?
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?
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 GDP
Chapter 33 Solutions
Economics (Irwin Economics)
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