Suppose potential income is $60 billion, actual income is $40 billion, and expenditures don't vary with income. If the actual budget deficit is $4 billion and the marginal tax rate is 20 percent, the structural deficit:
A. is $4 billion.
B. is zero.
C. is between zero and $4 billion.
D. cannot be determined from the given information.
Answer: B
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Maureen left her teaching job, which paid $30,000 per year, and invested $20,000 of her retirement fund (which was earning 10 percent interest) in a new real estate business. Her accountant predicted a $60,000 revenue the first year. Her husband, an economist, forecast her profit to be
A. $10,000. B. $28,000. C. $32,000. D. $60,000.
Saving is a leakage from the circular flow. Why didn't the classical economists think saving might cause consumption expenditures to fall short of total output?
What will be an ideal response?
During the recession of 2007-2009 in the United States, ________ relative to potential GDP
A) business fixed investment spending rose and net export spending declined B) consumption spending rose and residential construction spending declined C) federal government purchases rose and changes in business inventories declined D) net export spending rose and consumption spending declined
A monetary expansion ________ stock prices due to a decrease in the ________ and an increase in the ________, everything else held constant
A) reduces; future sales price; expected rate of return B) reduces; current dividend; expected rate of return C) increases; required rate of return; future sales price D) increases; required rate of return; dividend growth rate