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government finances the deficit by issuing bonds, what amount. billion percent rate of interest, how much interest will the government eficit billion the interest payment to the government's $5 trillion expenditures in the second year, compute the billion

government finances the deficit by issuing bonds, what amount. billion percent rate of interest, how much interest will the government eficit billion the interest payment to the government's $5 trillion expenditures in the second year, compute the billion

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter12: Fiscal Policy, Incentives, And Secondary Effects
Section: Chapter Questions
Problem 1CQ
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Onnect Assignment Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $5 trillion while raising only $4 trillion worth of taxes Mc Graw Hill Instructions: Round your responses to one decimal place. a. What will be the government's deficit? $1 billion b. If the government finances the deficit by issuing bonds, what amount of bonds will it issue? $ c. At a 3 percent rate of interest, how much interest will the government pay each year? $ billion d. Add the interest payment to the government's $5 trillion expenditures for the next year, and assume that tax revenues remain at $4 trillion. In the second year, compute the (1) Deficit. $ (1) Amount of new debt (bonds) issued to finance the deficit in the second year. $1 billion y clear billion billion () Total debt at the end of the second year $ billion (iv) Debt service requirement. $ billion ▬▬ Q Search 4 < Prex W 7 of 9 Next > e
Transcribed Image Text:Onnect Assignment Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $5 trillion while raising only $4 trillion worth of taxes Mc Graw Hill Instructions: Round your responses to one decimal place. a. What will be the government's deficit? $1 billion b. If the government finances the deficit by issuing bonds, what amount of bonds will it issue? $ c. At a 3 percent rate of interest, how much interest will the government pay each year? $ billion d. Add the interest payment to the government's $5 trillion expenditures for the next year, and assume that tax revenues remain at $4 trillion. In the second year, compute the (1) Deficit. $ (1) Amount of new debt (bonds) issued to finance the deficit in the second year. $1 billion y clear billion billion () Total debt at the end of the second year $ billion (iv) Debt service requirement. $ billion ▬▬ Q Search 4 < Prex W 7 of 9 Next > e
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