Question

Government expenditures= $7000, taxes =l 0,6Y, government transfers = 0,25Y. National debt is $10 000, annual...

Government expenditures= $7000, taxes =l 0,6Y, government transfers = 0,25Y. National debt is $10 000, annual interest rate on government debt = 15%. Total output = $20 000, however total potential output = $25 000.

Calculate structural and cyclical budget deficit.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Total Expenditures = $7000 + 0.25Y + $10000 + (0.15*$10000)

Y = $20000 (given)

Therefore, Total expenditures = $7000 + (0.25*20000) + $10000 + (0.15*$10000)

= $7000 + $5000 + $10000 + $1500 = $23500

Total revenues = $20000

Budget Deficit = $3500

But Total potential output = $25000

As per Okun's law, for a percent reduction in unemployment, output will get increased by two times.

Government will collect 0.6*$25000 = $15000

Cyclical budget deficit = $15000

Structural budget deficit = $25000- $15000 = $10000

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose government expenditures on goods and services increase, transfers are unchanged, and taxes rise by less...
Suppose government expenditures on goods and services increase, transfers are unchanged, and taxes rise by less than the increase in expenditures. These changes in the government’s budget cause Group of answer choices the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to fall. both the equilibrium interest rate and the equilibrium quantity of loanable funds to rise. both the equilibrium interest rate and the equilibrium quantity of loanable funds to fall. the equilibrium interest rate to...
In an economy, the MPC = 1.75. government needs to increase expenditures 520 to complete a...
In an economy, the MPC = 1.75. government needs to increase expenditures 520 to complete a project, but it does not want to increase debt, so it increases taxes s20 billion as well. Thus, there is balanced budget spending. What, if any, will be the change in output generated by this balanced-budget expenditure scenario, Change in output is $0 $15 billion increase $20 billion increase $20 billion decrease
2. A country has national saving of $60 million, government expenditures of $30 million, domestic investment...
2. A country has national saving of $60 million, government expenditures of $30 million, domestic investment of $40 million, and net capital outflow of $20 million. What is its supply of loanable funds? Show your work. . 3. In the open-economy macroeconomic model, the supply of loanable funds equals_______________. The demand for loanable funds comes from ________________ + _________________. 4. If there is a surplus of loanable funds, the quantity demanded is ___________(more/less) than the quantity supplied and the interest...
Consider an economy with a corn producer, some consumers, and a government. In a given year,...
Consider an economy with a corn producer, some consumers, and a government. In a given year, the corn producer grows 30 million bushels of corn and the market price for corn is $5 per bushel. Of the 30 million bushels produced, 20 million are sold to consumers, 5 million are stored in inventory, and 5 million are sold to the government to feed the army. The corn producer pays $60 million in wages to consumers and $20 million in taxes...
2) A spike in “All Other Outlays” of the federal government in 2009 was due to:...
2) A spike in “All Other Outlays” of the federal government in 2009 was due to: a) an increase in the financial aid given to Greece earlier that year. b) an increase in the expenditures on Social Security and Medicare. c) the fiscal stimulus package passed earlier that year. d) a sudden increase in military expenditure as a result of the war in Iraq. e) an increase in the national debt earlier that year. 3) In 2016, welfare spending accounted...
A government is currently operating with an annual budget deficit of​ $40 billion. The government has...
A government is currently operating with an annual budget deficit of​ $40 billion. The government has determined that every ​$10 billion reduction in the amount of bonds it issues each year would reduce the market interest rate by 0.05 percentage point.​ Furthermore, it has determined that every 0.10 ​(​one-tenth​) percentage point change in the market interest rate generates a change in planned investment expenditures in the opposite direction equal to ​$4 billion. The marginal propensity to consume is 0.80. ​Finally,...
exam3 #12 CBO expects higher​ long-term deficits The Congressional Budget Office​ (CBO) says the national debt...
exam3 #12 CBO expects higher​ long-term deficits The Congressional Budget Office​ (CBO) says the national debt is on an upward path and will hit 122 percent of GDP in 2040. Healthcare programs and Social Security benefits are the large drivers of spending over the coming decades. ​Source: The Wall Street Journal​, July​ 12, 2016 If the government decided to slow the growth of debt by cutting transfer payments and raising taxes by the same​ amount, how would this fiscal policy...
Suppose the following statistics characterize the financial health of the hypothetical economy Spendia at the end...
Suppose the following statistics characterize the financial health of the hypothetical economy Spendia at the end of 2017: • Gross domestic product (GDP) is equal to $100 billion. • The national debt is equal to $120 billion. • The government has a budget deficit of $9 billion. • The debt ceiling in Spendia is set at $139 billion. The following calculations help you see how the ratio of debt to GDP changes from one year to the next. Complete the...
Questions 9 to 15 are based on the following approximate figures for Island Mathos’s economy in...
Questions 9 to 15 are based on the following approximate figures for Island Mathos’s economy in 2019: Investment spending = R360 million Government spending = R420 million Real GDP = R2 100 million Estimated population = 20 million Labour force = 7 million Unemployment rate = 20% Budget deficit = R140 million Government debt = R500 million Multiplier = 2.5 9. Island Mathos experiences structural constraints. The central bank of the country and the World Bank estimated that the potential...
1. Government spending required by laws other than appropriation acts is also known as what? a....
1. Government spending required by laws other than appropriation acts is also known as what? a. Discretionary spending b. Budget spending c. Deficit spending d. Mandatory spending 2. What is the difference between discretionary and mandatory spending? a. Discretionary spending is determined by the president, and mandatory spending is determined by Congress. b. Discretionary spending cannot be changed without changing the law but mandatory spending can. c. Discretionary spending is determined by appropriation acts, and mandatory spending is determined by...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT