The budget deficit function BD for a country is given as: BD(Y)=G+iD-T(Y) where G is government expenditures (purchases of goods and services), i is the interest rate, D is the given stock of government debt and T(Y)=tY is the tax revenue function (net of program transfers). The potential output or real income Y in this country is attained when Y = Y*. The budget deficit diagram below, with a given net tax rate, will help you to keep track of your answers. BD Yo 76) A positive structural deficit is represented by: A) BD (Y₁). B) BD (Yo) 77) For a given debt level, the move represents a A) BD (Y) to BD(Y); expansionary. B) BD₁(Y) to BD(Y); neutral. C) BD (Y) to BD(Y); contractionary. D) BD(Y) to BD₁(Y); contractionary. E) BD (Y) to BD,(Y); neutral. 78) The stance of fiscal policy changes with: A) the real income Y. B) the govemment debt. C) the interest rate. D) the primary deficit. E) the debt service. C) BD (Y*). fiscal policy. D) BD₁(Y*) Y E) BD₁(Yo).
The budget deficit function BD for a country is given as: BD(Y)=G+iD-T(Y) where G is government expenditures (purchases of goods and services), i is the interest rate, D is the given stock of government debt and T(Y)=tY is the tax revenue function (net of program transfers). The potential output or real income Y in this country is attained when Y = Y*. The budget deficit diagram below, with a given net tax rate, will help you to keep track of your answers. BD Yo 76) A positive structural deficit is represented by: A) BD (Y₁). B) BD (Yo) 77) For a given debt level, the move represents a A) BD (Y) to BD(Y); expansionary. B) BD₁(Y) to BD(Y); neutral. C) BD (Y) to BD(Y); contractionary. D) BD(Y) to BD₁(Y); contractionary. E) BD (Y) to BD,(Y); neutral. 78) The stance of fiscal policy changes with: A) the real income Y. B) the govemment debt. C) the interest rate. D) the primary deficit. E) the debt service. C) BD (Y*). fiscal policy. D) BD₁(Y*) Y E) BD₁(Yo).
Chapter17: Federal Deficits, Surpluses, And The National Debt
Section: Chapter Questions
Problem 7SQP
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Transcribed Image Text:The budget deficit function BD for a country is given as:
BD(Y)=G+iD-T(Y)
where G is government expenditures (purchases of goods and services), i is the interest rate, D is the given
stock of government debt and T(Y)=tY is the tax revenue function (net of program transfers). The potential
output or real income Y in this country is attained when Y = Y*.
The budget deficit diagram below, with a given net tax rate, will help you to keep track of your answers.
BD
Yo
76) A positive structural deficit is represented by:
A) BD (Y1).
B) BD (YO)
77) For a given debt level, the move
Y*
represents a
A) BD₁(Y) to BDo(Y); expansionary.
B) BD₁(Y) to BD(Y); neutral.
C) BD (Y) to BD(Y); contractionary.
D) BD(Y) to BD (Y); contractionary.
E) BD (Y) to BD₁(Y); neutral.
78) The stance of fiscal policy changes with:
A) the real income Y.
B) the govemment debt.
C) the interest rate.
D) the primary deficit.
E) the debt service.
Y₁
C) BD (Y*).
fiscal policy.
D) BD₁(Y*)
Y
E) BDI(YO).
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