(b) Given that nothing else is borrowed in the near future, the length of time it will takea government to completely eliminate its stock of debt will be entirely dependent onhow much more annual repayments exceed the annual interest expenses. Theinterest expense portion of the debt is a function of the present stock of debt, y, andis given byi(y) %3D у — у?The amount of money that the government repays to reduce its debt stock isassumed to be a fraction, a, of the present stock of debt. Repayment is done at theend of each financial year.(i)(ii)Solve for the present stock of debt, y, as a function of t.What will happen to government debt as t → ∞? Justify your response.

Yield to maturity (YTM) is the total rate of return that a bond will have achieved after all…

Answered: (b) Given that nothing else is borrowed…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

Problem 6PA

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If you would have to pay $8,000 in taxes on $90,000 taxable income and $10,000 in taxes on $94,000 taxable income, then the marginal tax rate on the additional $4,000 of income is Mutiple Choice 10 percent, and the average ta rate is so percent at the $94.000 income evel 50 percent, ond the average tax rate is 20 percent at the S90.000 income evel s0 percent, but avernge tax rates cannot be determined from the intormation given 50 percent, and the average tax rate is about 11 percent at the $94.000 income level
Table 24.8 All Figures in Billions of Dolllars Comsumption Spending Income) Net Taxes (C=100 +0.9Yd) 2,350 2,530 2,710 2,890 3,070 3,250 3,430 Planned Investment Purchases 150 150 150 150 150 150 150 Outpat 2,600 2,800 3,000 3,200 3,400 3,600 3,800 100 100 100 100 100 100 100 Savings 150 170 190 210 230 250 |270 Government Spending 200 200 200 200 200 200 200 etle Refer to Table 24.8. If taxes are reduced from $100 billion to $50 billion, the new equilibrium level of output is Lütfen birini seçin: O A. $4,050 billion O B. $1,600 billion O C. $3,850 billion O D. $1,800 billion O E $2,100 billion
the Savings function of UAE is: S 0.25Y. The Goverment of UAE has spent 100 billion dirham to develop its physical infrastructure. To what extent, UAE's national income will be expanded
The YTM on Apple bond is 3%. The tax rate is 21%. What is the after-tax cost of debt? Select one: a. 2.50 O b. 3% С. 2.37% O d. 2.75%
Future debt is basically the sum of: (i) past debt (ii) interest payments (iii) budget deficit (iv) net change in assets O a. (i) and (ii) O b. (i), (ii), and (iii) O c. (i) and (iii) O d. (i), (ii), (iii), and (iv)
What is a government budget deficit? How doesit affect interest rates, investment, and economicgrowth?
._______ When not provided, they become dissatisfiers.
Table 24.8 All Figures in Billions of Dollars Comsumption Spending Imcome) Net Taxes (C=100 + 0.9Yd) 2,350 2,530 2,710 2,890 3,070 3,250 3,430 Planned Investment Purchases 150 150 150 150 150 150 150 di Output Savings 150 170 190 210 230 250 270 Government Spending 200 200 200 200 200 200 200 en 2,600 2,800 3,000 3,200 3,400 3,600 3,800 100 100 100 100 100 100 100 aretle Refer to Table 24.8. The economy is at the equilibrium level of output. If government spending increases by $200 billion, the new equilibrium level of output is Lütfen birini seçin: O A. $4,400 billion O B. $4,000 billion OC $5,600 billion O D. $4,600 billion. O E $3,800 billion
Roberto Clemente's marginal federal income tax rate is 20%. How much money will Roberto save in federal income taxes if he deposits the $13,675 in a tax-deferred retirement account instead of depositing it in a taxable account? Taxes round to the dollar
2. The municipality of Trento has arranged to borrow P30 million in order to implement several publicprojects (flood control, drainage system, etc.). The interest rate will be 3% per year, payable at theend of each year. This P30 million debt will be retired by making principal payments of P5 million atthe end of each year. The SB Members is concerned that it will take too long to pay off this debt. Howmany years will it take to fully pay the P30 million debt and its associated interest payments? (5 pts)(Show the Cash flow diagram and your solutions).
Year 1 2 3 4 5 6 7 8 9 Actual Budget Deficit (-) or O Surplus (+) +1.4% +2.5 +1.3 -1.5 -3.4 -3.5 -2.6 -1.9 -1.3 Refer to the data in the table. The direction of fiscal policy became more expansionary from Multiple Choice O Year 1 to 2. Year 6 to 7. Year 4 to 5. Cyclically Adjusted Deficit (-) or Surplus (+) +0.1% +1.1 +1.1 -1.1 -2.7 -2.4 -1.8 -1.8 -1.4 Year 5 to 6.
Interest Rate (%) 20 18 16 14 12 10 8 6 2 0 ID₂ ID₁ 5 10 15 20 25 30 35 40 45 50 Investment ($B) Refer to the diagram. Assume that the investment demand curve is ID₁. The crowding-out effect of a large public debt would be shown as a(n) O shift of the investment demand curve from ID₁ to ID₂. O leftward shift of the investment demand curve. O increase in the interest rate from 4 percent to 6 percent and a decline in investment spending of $5 billion. O increase in the interest rate from 6 percent to 8 percent and a decline in investment spending of $40 billion.

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