Budget Deficits and Surplus, Microeconomics

In year one, suppose the federal government has no national debt and spends $100 billion, while raising only $50 billion in taxes. The U.S. Treasury will issue $ billion of government bonds to finance the deficit.

b. In year two, assume tax revenues and government expenditures remain the same. If the government makes a payment on debt service at 10 percent rate of interest , this will yield a total government expenditure in the second year of $ billion.

c. Therefore in year two, the deficit will be equal to $ billion, the amount of new debt issued will be $ billion and the new national debt (year one + year two) will equal $ billion.
Posted Date: 4/7/2012 3:46:49 PM | Location : United States







Related Discussions:- Budget Deficits and Surplus, Assignment Help, Ask Question on Budget Deficits and Surplus, Get Answer, Expert's Help, Budget Deficits and Surplus Discussions

Write discussion on Budget Deficits and Surplus
Your posts are moderated
Related Questions
Advantages of Division of labour: Division of labour has advantages including the following: Development of Greater Skill by the Worker In division of labour, each

Methods of Forecasting The various methods of forecasting demand may be grouped under the followings categories: Opinion Polling Method: In this method the opinion

Comparison of sameulson revealed preference theory with the Hicksian revealed preference theoru

The Money Creation Process is explained below: We can now study the money supply or the creation process. Suppose the government wishes to buy pencils worth Rs. 10 for the offi

Labour Extraction: Most employees under capitalism are paid according to time they spend at work. Though employers then face a challenge to extract genuine labour effort from their

explain the difference between traditional theory and modern theory of cost

Working of IFC: The IBRD loans are available only to member-country governments or with theĀ guarantee of member-country governments. Further, IBRD can only make a loanĀ but it


Determine the Slutsky Equation. Income-Substitution Effect: The Slutsky Equation A fall into the price of a good may have two sorts of consequences: substitution effect, whe

Problem 1: (a) Critically examine the differences between the Neo-classical growth models and the endogenous growth theory. (b) Show the relevance of such models in explain