Question

2. Assume Yn = 20000, t = 0.16 and G = 3600

2.1. Compute the structural deficit

2.2. Compute the cyclical deficit when Y = 19000

2.3. If this country intends to achieve the balanced budget and keep its tax rate constant, calculate the income level Y actual necessary to make this happen.

2.4. If this country intends to achieve the balanced budget at the natural real GDP given above, calculate the new tax rate.

Answer 1

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