Explain the difference between a budget deficit and the national debt.
Budget deficit is a budget for one year and national debt is the total of all debts
Use the Marginal Income Tax Rates in Figure 15.6 (see p. 463) to compute the following:
Tax due on taxable income of $100,000, $200,000, and $500,000.
+ 0.33 * 200,000
+ 0.35 * 500,000
Average tax rate on taxable income of $100,000, $200,000, and $500,000.
100,000 = 28%
200,000 = 33%
Greece, Ireland, Portugal, and Spain all went through national budget difficulties in recent
years. Use the data below to answer questions regarding the sovereign debts of these nationals
(All data comes from the OECD and is in billions of current US dollars.).
Compute the debt-to-GDP ratio for all four nations in both 2000 and 2010.
DEBT TO GDP
Compute the average yearly budget deficit for each of the nations over this period.
In your judgment, which of the four nations was in the worse fiscal shape in 2010? Use your
computations from above to justify your answer. Greece is the worse fiscal shape in 2010.
Greece’s debt to gdp jumped from 1.09 to 1.48
Explain the differences between typical demand side fiscal policy and supply side fiscal
policy. For each of the following fiscal policy proposals, determine whether the primary focus
is on aggregate demand or aggregate supply or both.
The difference between typical demand side fiscal policy and supply side fiscal policy is
demand side fiscal policy
is government trying to intervene to shift aggregate demand whetver
on unemployment or inflation. Supply side fiscal policy is intended to help business to solve
inflation and unemployment
A $1000 per person tax reduction. - demand side fiscal policy
A 5% reduction in all tax rates. - both
Pell grants, which are government subsidies for college education. - demand side fiscal
Government sponsored prizes for new scientific discovery.-
Supply side fiscal policy
An increase in unemployment compensation -. demand side fiscal policy
Fill in the blanks in the table below. Assume that the MPC is constant over everyone in the