(Government Deficit and Surplus) 100 80 60 40 20 0 $100 200 300 400 500 600 700
ID: 2495210 • Letter: #
Question
(Government Deficit and Surplus) 100 80 60 40 20 0 $100 200 300 400 500 600 700 s0o 900 GDP 1. T is tax revenues and G is government expenditures. All figures are in billions of dollars. If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the actual budget deficit is $( billion) 2. If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the cyclically-adjusted budget deficit is S ( billion) 3. If the full-employment GDP is $400 billion while the actual GDP is $300 billion, the cyclical deficit is S ( billion) 4. If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the actual budget deficit (exceeds, is short of, is the same as) the cyclically-adjusted budget deficit. 5. If the full-employment GDP and actual GDP are each $400 billion, this economy will realize a cyclically-adjusted deficit of $( bllon). 6. If the full-employment and actual GDP are each $400 billion, government can balance its cyclically-adjusted budget by reducing G by $(billion) 7. What is meant by a balanced budget? At which GDP level does this economy have a balanced budget?Explanation / Answer
1. AT ACTUAL EMPOLYMENT LEVEL WE HAVE TAXES = 20 AND GOVERNMENY EXPENDITURE = 60.THEREFORE GOVERNMENT EXPENDITURE LESS GOVERNMENT REVENUES = 40
2. 20 = 60 - 40 .IT IS MEASURED AT FULL EMPOLYMENT LEVEL
3.30
4.EXCEEDS.
5.20
6.20
7.A balanced budget (particularly that of a government) refers to a budget in which revenues are equal to expenditures. Thus, neither abudget deficit nor a budget surplus exists ("the accounts balance").At a GDP level of 600 we have a balanced budget.
8. A balanced-budget amendment is a constitutional rule requiring that a state cannot spend more than its income. It requires a balance between the projected receipts and expenditures of the government.Recession is a slowdown or a massive contraction in economic activities. A significant fall in spending generally leads to a recession.When a economy is having balanced budget amendment .Most economists agree that a balanced budget would:
The mainstream economic view is that having a balanced budget in every year is not desirable. If a country rigidly pursues a balanced budget regardless of the circumstances, critics argue that economic downturns would be needlessly painful. If balanced budgets were required and if the budget was in deficit during a recession, critics argue that the required cuts would make the economy even worse off.
Keynesian economists argue that government budgets should be balanced over the business cycles. During recessions governments should run deficits. Keynesians argue that increasing government spending and decreasing taxes can minimize the painful effects of a recession. Once an economy moves into a growth cycle, Keynesians believe the government should shift its perspective and try to run a budget surplus by decreasing spending and increasing taxes. By balancing deficits in recessions and surpluses in growth, Keynesians believe that the government can obtain the benefits of a balanced budget without facing the risks of making recessions worse due to spending and revenue limitations.
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