The following table shows government spending and tax revenue for a hypothetical economy over a five-year period. All figures are in billions. Government Tax Spending (G) Revenues (T) Year 1 $1100 $1050 2 1150 1100 3 1250 1150 4 1250 1300 5 1300 1250 budget deficit = G - T > 0 budget surplus = T - G > 0 A. In what years were there budget deficits and what were the amounts? B. In what year was there a budget surplus and what was the amount? C. What is the public debt accumulated in this economy over the five years? (Public debt is the excess of budget deficits over budget surpluses for years.) D. If the GDP was $6000 in year 5, what would be the public debt-to-GDP ratio in year 5? the public debt-to-GDP ratio = (public debt/GDP) \* 100
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In what years were there budget deficits and what were the amounts? - Year 1: Budget deficit of $50 billion - Year 2: Budget deficit of $100 billion - Year 3: Budget deficit of $150 billion B. In what year was there a budget surplus and what was the amount? - Show more…
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Consider the following planned aggregate expenditure model with proportional taxes and an open economy: planned investment, I = $5 trillion; government spending G = $3 trillion; Taxes are proportional to GDP with t=0.10 (Thus total taxes will be equal to t multiplied by Y); the consumption function, C(Y-T)= $4 trillion + 0.6((1-t)Y); EX= $4 trillion; and IM= $2 trilliion +0.06Y. a. What is the equilibrium level of GDP? b. At the equilibirum level of GDP: What is total consumption in the economy? c. At the equilibrium level of GDP: What is total savings in the economy? d. What is the government spending multiplier? (Hint: Consider a $1 trillion dollar increase in GDP) e.Is there a trade deficit or a trade surplus? How large is it?
Consider the following planned aggregate expenditure model with proportional taxes and an open economy: planned investment, I = $5 trillion; government spending G = $3 trillion; Taxes are proportional to GDP with t=0.10 (Thus total taxes will be equal to t multiplied by Y); the consumption function, C(Y-T)= $4 trillion + 0.8((1-t)Y); EX= $4 trillion; and IM= $2 trillion +0.06Y. a. What is the equilibrium level of GDP? b. At the equilibrium level of GDP, what is total consumption in the economy? c. At the equilibrium level of GDP, what is total savings in the economy? d. What is the government spending multiplier? (Hint: Consider a $1 trillion dollar increase in GDP) e. Is there a trade deficit or a trade surplus? How large is it?
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