Table 15.3 Cordelia Saldinia \[\begin{array} { | l | r | r | } \hline \text { Debt-to-cDP ratio } & 172 \% & 65 \% \\ \hline \text { Average annual ecanmaic growth } & & \\ \text { unt } & 4.7 \% & 3.2 \% \\ \hline \text { Average influtim rate } & 6.3 \% & - 0.3 \% \\ \hline \text { Average nominal interest rate } & 2.5 \% & 4.6 \% \\ \hline \end{array}\] The above table contains data for the nations of Cordelia and Saldinia for 2012. Assume seigniorage is zero. -Refer to Table 15.3.Based on the data in the table,the primary budget deficit necessary to make fiscal policy sustainable in Saldinia is ________ of GDP.

A) -5.3% B) -1.1% C) 1.1% D) 6.5% A) -5.3% B) -1.1% C) 1.1% D) 6.5% B

Table 15.1 $\begin{array}{l|r} \text { Federal govermment purchases of } & \\ \text { goods and services } & \$ 455 \text { million } \\ \hline \text { Transfer payments } & \$ 85 \text { million } \\ \hline \text { Tax revenue } & \$ 405 \text { million } \\ \hline \text { Interest payment on existing debt } & \$ 60 \text { million } \\ \hline \text { Seigniorage } & \$ 10 \text { million } \\ \hline \text { Newly-issued government bonds } & \$ 185 \text { million } \end{array}$ The data in the table represents budget figures for the nation of Arugula for 2012. -Refer to Table 15.1.The budget deficit for Arugula in 2012 is

A) $135 million. B) $195 million. C) $380 million. D) $600 million. A) $135 million. B) $195 million. C) $380 million. D) $600 million.

Table 15.3 Cordelia Saldinia \[\begin{array} { | l | r | r | } \hline \text { Debt-to-cDP ratio } & 172 \% & 65 \% \\ \hline \text { Average annual ecanmaic growth } & & \\ \text { unt } & 4.7 \% & 3.2 \% \\ \hline \text { Average influtim rate } & 6.3 \% & - 0.3 \% \\ \hline \text { Average nominal interest rate } & 2.5 \% & 4.6 \% \\ \hline \end{array}\] The above table contains data for the nations of Cordelia and Saldinia for 2012. Assume seigniorage is zero. -Refer to Table 15.3.Based on the data in the table,the primary budget deficit necessary to make fiscal policy sustainable in Cordelia is ________ of GDP.

A) -1.5% B) 0% C) 1.5% D) 14.6% A) -1.5% B) 0% C) 1.5% D) 14.6%

Exam 15: Fiscal Policy and the Government Budget in the Long Run

Table 15.2 Federal goverunent expenditures on goods and sernices \ 840 million Trarsfer payments \ 145 million Tax reverue \ 735 million frterest payment on existing debt \ 95 million Seigriorage \ 20 million Newly-issued poverunent bonds \ 325 million The data in the table represents budget figures for the nation of Harmonia for 2012. -Refer to Table 15.2.From the information presented in the table,calculate the following values for the nation of Harmonia in 2012: a. the budget deficit b. the primary budget deficit c. the uses of government funds d. the sources of government funds

Free

(Essay)

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Question 1

Correct Answer:

Verified

a. The budget deficit = Gt + TRt + itBt₋₁ -Tt
= $840 million + $145 million + $95 million - $735 million = $345 million.
b. The primary budget deficit = The budget deficit - itBt₋₁
= $345 million - $95 million = $250 million.
c. The uses of government funds = Gt + TRt + itBt₋₁
= $840 million + $145 million + $95 million = $1,080 million.
d. The sources of government funds = Tt + △Bt + △MBt
= $735 million + $325 million + $20 million = $1080 million.

Table 15.3 Cordelia Saldinia Debt-to-cDP ratio 172\% 65\% Average annual ecanmaic growth unt 4.7\% 3.2\% Average influtim rate 6.3\% -0.3\% Average nominal interest rate 2.5\% 4.6\% The above table contains data for the nations of Cordelia and Saldinia for 2012. Assume seigniorage is zero. -Refer to Table 15.3.Based on the data in the table,the primary budget deficit necessary to make fiscal policy sustainable in Saldinia is ________ of GDP.

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

Suppose that for the nation of Calliope,the debt-to-GDP ratio is 325%,the average annual growth rate is 1.1%,the average inflation rate is 0.5%,and the average nominal interest rate is 2.2%.Based on this information,determine if fiscal policy is sustainable in Calliope,and if not,what the primary budget deficit would have to be to make fiscal policy sustainable.

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Question 3

Correct Answer:

Verified

The real interest rate = 2.2 - 0.5 = 1.7%.Since the real interest rate is greater than the growth rate,Calliope's fiscal policy is not sustainable.
The primary deficit needed to sustain the debt + (the real interest rate - the growth rate)(debt-to-GDP ratio)= 0
0 = PDt/PtYt + (0.017 - 0.011)(3.25)
0 = PDt/PtYt + 0.0195
PDt/PtYt = -0.0195,or -1.95%
This means that Calliope would have to run a primary surplus of 1.95% of GDP to make fiscal policy sustainable.

Suppose the government cuts taxes by $300 million dollars this year and must pay off its debt next year by increasing taxes by $300 million.According to Ricardian equivalence,consumption spending will this year and next year,all else equal.

(Multiple Choice)

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Question 4

Assume that seigniorage and the government's primary deficit are both zero.A change in the debt-to-GDP ratio depends on just

(Multiple Choice)

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Question 5

Holding everything else constant,if the nominal interest rate decreases,the interest paid on the debt the debt-to-GDP ratio,and nominal GDP growth the debt-to-GDP ratio.

(Multiple Choice)

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Question 6

Table 15.1 Federal govermment purchases of goods and services \ 455 million Transfer payments \ 85 million Tax revenue \ 405 million Interest payment on existing debt \ 60 million Seigniorage \ 10 million Newly-issued government bonds \ 185 million The data in the table represents budget figures for the nation of Arugula for 2012. -Refer to Table 15.1.The budget deficit for Arugula in 2012 is

(Multiple Choice)

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Question 7

The government's budget constraint is best represented by which of the following equations?

(Multiple Choice)

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Question 8

Since 1981,the annual revenue received by the Canadian federal government from taxes has averaged roughly of GDP,and the annual revenue received from seigniorage has averaged of GDP.

(Multiple Choice)

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Question 9

Explain why many economists are skeptical about whether Ricardian equivalence describes the behaviour of households in the economy.

(Essay)

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Question 10

What is necessary for fiscal policy to be sustainable? Why is fiscal policy in countries like Greece,Ireland,Spain,Italy,and Portugal not considered sustainable?

(Essay)

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Question 11

If the government issues new government bonds to finance a budget deficit,the real interest rate in financial markets will and investment spending will .

(Multiple Choice)

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Question 12

The value of bonds outstanding

(Multiple Choice)

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Question 13

The government's budget deficit is best represented by which of the following equations?

(Multiple Choice)

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Question 14

From 1995 through 2015,the debt-to-GDP ratio in Canada

(Multiple Choice)

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Question 15

The conventional view among economists is that persistent budget lead to a lower level of potential GDP in the run.

(Multiple Choice)

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Question 16

The government's budget deficit is financed by some combination of all of the following except

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Question 17

Since 1992,Canadian federal expenditures have ________ as a percentage of GDP.

(Multiple Choice)

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Question 18

Table 15.3 Cordelia Saldinia Debt-to-cDP ratio 172\% 65\% Average annual ecanmaic growth unt 4.7\% 3.2\% Average influtim rate 6.3\% -0.3\% Average nominal interest rate 2.5\% 4.6\% The above table contains data for the nations of Cordelia and Saldinia for 2012. Assume seigniorage is zero. -Refer to Table 15.3.Based on the data in the table,the primary budget deficit necessary to make fiscal policy sustainable in Cordelia is ________ of GDP.

(Multiple Choice)

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Question 19

The most important source of revenue for the federal government is

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Question 20

Showing 1 - 20 of 55

Suppose the government cuts taxes by $300 million dollars this year and must pay off its debt next year by increasing taxes by $300 million.According to Ricardian equivalence,consumption spending will this year and next year,all else equal.

Assume that seigniorage and the government's primary deficit are both zero.A change in the debt-to-GDP ratio depends on just

Holding everything else constant,if the nominal interest rate decreases,the interest paid on the debt the debt-to-GDP ratio,and nominal GDP growth the debt-to-GDP ratio.

The government's budget constraint is best represented by which of the following equations?

Since 1981,the annual revenue received by the Canadian federal government from taxes has averaged roughly of GDP,and the annual revenue received from seigniorage has averaged of GDP.

Explain why many economists are skeptical about whether Ricardian equivalence describes the behaviour of households in the economy.

What is necessary for fiscal policy to be sustainable? Why is fiscal policy in countries like Greece,Ireland,Spain,Italy,and Portugal not considered sustainable?

If the government issues new government bonds to finance a budget deficit,the real interest rate in financial markets will and investment spending will .

The value of bonds outstanding

The government's budget deficit is best represented by which of the following equations?

From 1995 through 2015,the debt-to-GDP ratio in Canada

The conventional view among economists is that persistent budget lead to a lower level of potential GDP in the run.

The government's budget deficit is financed by some combination of all of the following except

Since 1992,Canadian federal expenditures have ________ as a percentage of GDP.

The most important source of revenue for the federal government is

Introduction to Macroeconomics and the Great Recession

Measuring the Macroeconomy

The Canadian Financial System

Money and Inflation

The Global Financial System and Exchange Rates

The Labour Market

The Standard of Living Over Time and Across Countries

Long-Run Economic Growth

Business Cycles

Explaining Aggregate Demand: the Is-Mp Model

The Is-Mp Model: Adding Inflation and the Open Economy

Monetary Policy in the Short Run

Fiscal Policy in the Short Run

Aggregate Demand, aggregate Supply, and Monetary Policy

Consumption and Investment

Filters

Exam 15: Fiscal Policy and the Government Budget in the Long Run

Suppose the government cuts taxes by $300 million dollars this year and must pay off its debt next year by increasing taxes by $300 million.According to Ricardian equivalence,consumption spending will ________ this year and ________ next year,all else equal.

Assume that seigniorage and the government's primary deficit are both zero.A change in the debt-to-GDP ratio depends on just

Holding everything else constant,if the nominal interest rate decreases,the interest paid on the debt ________ the debt-to-GDP ratio,and nominal GDP growth ________ the debt-to-GDP ratio.

The government's budget constraint is best represented by which of the following equations?

Since 1981,the annual revenue received by the Canadian federal government from taxes has averaged roughly ________ of GDP,and the annual revenue received from seigniorage has averaged ________ of GDP.

Explain why many economists are skeptical about whether Ricardian equivalence describes the behaviour of households in the economy.

What is necessary for fiscal policy to be sustainable? Why is fiscal policy in countries like Greece,Ireland,Spain,Italy,and Portugal not considered sustainable?

If the government issues new government bonds to finance a budget deficit,the real interest rate in financial markets will ________ and investment spending will ________.

The value of bonds outstanding

The government's budget deficit is best represented by which of the following equations?

From 1995 through 2015,the debt-to-GDP ratio in Canada

The conventional view among economists is that persistent budget ________ lead to a lower level of potential GDP in the ________ run.

The government's budget deficit is financed by some combination of all of the following except

Since 1992,Canadian federal expenditures have ________ as a percentage of GDP.

The most important source of revenue for the federal government is

Introduction to Macroeconomics and the Great Recession

Measuring the Macroeconomy

The Canadian Financial System

Money and Inflation

The Global Financial System and Exchange Rates

The Labour Market

The Standard of Living Over Time and Across Countries

Long-Run Economic Growth

Business Cycles

Explaining Aggregate Demand: the Is-Mp Model

The Is-Mp Model: Adding Inflation and the Open Economy

Monetary Policy in the Short Run

Fiscal Policy in the Short Run

Aggregate Demand, aggregate Supply, and Monetary Policy

Consumption and Investment

Filters

Suppose the government cuts taxes by $300 million dollars this year and must pay off its debt next year by increasing taxes by $300 million.According to Ricardian equivalence,consumption spending will this year and next year,all else equal.

Holding everything else constant,if the nominal interest rate decreases,the interest paid on the debt the debt-to-GDP ratio,and nominal GDP growth the debt-to-GDP ratio.

Since 1981,the annual revenue received by the Canadian federal government from taxes has averaged roughly of GDP,and the annual revenue received from seigniorage has averaged of GDP.

If the government issues new government bonds to finance a budget deficit,the real interest rate in financial markets will and investment spending will .

The conventional view among economists is that persistent budget lead to a lower level of potential GDP in the run.