Question: I am stuck on a problem on my homework. I need your help!!!!!!!!!!!!!!!!
You are Secretary of the Treasury Jack Lew. It’s six months into Obama’s second term as president and you receive some estimates of national accounts numbers you plan to report to the President in a cabinet meeting. Under one set of expectations, government expenditures will be $30 billion, transfer payments will be $10 billion, and taxes will be $45 billion. Under another set of expectations, GDP will be $200 billion, taxes will be $50 billion, transfer payments will be $20 billion, consumption will be $120 billion, and investment will be $40 billion.
a. Based on these numbers in the first case there should be a surplus or deficit of how much?
b. Under the second scenario, there should be a surplus or deficit of how much? Edit
Answer: a. Based on these numbers in the first case there
should be a surplus or deficit of how much?
Govt expenditure= 30+10= 40 billion
Govt. Income= 45 billion
Hence there is a surplus of = income- expenditure= 45-40= 5 billion
b. Under the second scenario, there should be a
surplus or deficit of how much?
or, 200= 120 +G+ 40
or, G= 40 billion
where G= govt. expenditure
Total govt. expenditure= G+ transfer payments= 40+20= 60 billion
Govt income= taxes= 50
Hence, there is a deficit= expenditure- income= 60-50= 10 billion
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