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Chapter 14: Q.16 (page 320)

Take a look at the most recent years of data on the net public debt displayed in Figure 14-3, and then examine the most recent years of data on federal budget deficits shown in Figure 14-2. Why do you suppose that the net public debt as a percentage of GDP has grown more slowly recently than was the case between 2008 and 2015 ?

Short Answer

Expert verified

The narrowing of the federal budget deficit after2015caused the net public debt as a percentage of GDP has grown more slowly

Step by step solution

01

introduction

A rise in the Federal Budget Deficit is an aftereffect of expanded government spending, import/export imbalance, neglected credit and lessening in the expense and non-charge incomes.

02

explanation

During a similar time, expansionary financial devices expanded total interest and the pace of expansion started to rise. The public authority's financial and money related drives drove the economy to the way of monetary adjustment. The obligation trouble along these lines started to pay off the obligation GDP proportion and hence the more slow development of the proportion in the new years.

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Most popular questions from this chapter

Why might nations' governments earn lower-than-anticipated revenues from asset sales if all governments offered similar assets for sale simultaneously? (Hint: What would happen to asset supplies and market clearing prices if all governments sought to sell substantial numbers of the same types of assets?)

Explain how each of the following will affect the net public debt, other things being equal.

a. Previously, the government operated with a balanced budget, but recently there has been a sudden increase in federal tax collections.

b. The government had been operating with a very small annual budget deficit until three hurricanes hit the Atlantic Coast, and now government spending has risen substantially.

c. The Government National Mortgage Association, a federal government agency that purchases certain types of home mortgages, buys U.S. Treasury bonds from another government agency.

To eliminate the deficit (and halt the growth of the net public debt), a politician suggests that "we should tax the rich." "The politician makes a simple arithmetic calculation in which he applies a higher tax rate to the total income reported by "the rich" in a previous year. He says that the government could thereby solve the deficit problem by taxing "the rich."What is the major fallacy in such a claim?

Evaluate circumstances under which the public debt could be a burden to future generations.

It may be argued that the effects of a higher public debt are the same as the effects of a higher deficit. Why?
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