If the actual budget deficit is $100 billion, the economy is operating $250 billion below its potential, and the marginal tax rate is 20 percent, then:
a. There is a passive surplus of $150 billion, and a structural deficit of $50 billion
b. There is a passive surplus of $50 billion, and a structural deficit of $150 billion
c. There is a passive deficit of $50 billion, and a structural deficit of $50 billion
d. There is a passive deficit of $50 billion, and a structural deficit of $150 billion
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Expert's answer
2012-05-09T08:50:03-0400
d. There is a passive deficit of $50 billion, and a structural deficit of $150 billion If the actual budget deficit is $100 billion, the economy is operating $250 billion below its potential, and the marginal tax rate is 20 percent, then passive deficit = 100 - 250*0.2 = 50, structural deficit = 250 - 50 - 50 = 150
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