Answer the following questions based on the chart below: (In the chart below, T

Question

Answer the following questions based on the chart below: (In the chart below, T is tax revenues and G is government expenditures. All figures are in billions of dollars.) For Year 1, assume that both the natural (potential) and the actual real GDP are $l5,0000bi. 1. In Year 1, the actual budget deficit is $ billion, the cyclical deficit is $ billion, and the structural budget deficit is $ billion. For Year 2 and Year 3, assume the natural (potential) level of real GDP is $15,000, while actual real GDP is $12,500bi. 2. In Year 2, the actual budget deficit is $ billion, the cyclical deficit is $ billion, and the structural budget deficit is $ billion. In Year 3 assume that net taxes (T) are $500 bi. less and government spending (G) is $500 bi. more (than their original Year 1 values) at each level of real GDP. 3. In Year 3, the actual budget deficit is $ billions, the cyclical deficit is $ billions, and the structural budget deficit is $ billion. 4. From Year 1 to Year 3, the actual budget deficit increased by $ billion. The recession (or the cyclical component) was responsible for $ billion of that increase; tax cuts were responsible for $ billion of that increase; and increased government spending was responsible for $ billion of that increase.

Explanation / Answer

1) 0;0;0

2) 3500,

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