macro: deficits and debts
In 2016 the national debt on Naboo was $100 million. Naboo pays 4% annual interest on that debt, but debt payments were not included in the national budget. The table below shows the tax revenues, government spending, and transfer payments from 2017. If Naboo's government does not want to add to its debt and have a balanced budget in 2017, which of the following actions will achieve those objectives?
Reduce government spending to $246 million or less
Which of the following best describes the circumstances in which a government will run a budget deficit?
Tax revenues are less than the sum of the government spending component of real GDP and transfer payments
Which of the following best describes the circumstance in which a government will run a budget surplus?
Tax revenues are more than the sum of the government spending (G) component of real GDP and transfer payments
The government of Hamsterville had a balanced budget, but now is experiencing a recession. Which of the following is most likely to occur as a result of the recession?
A budget deficit
Which of the following changes would cause a balanced budget to move to a budget surplus?
A decrease in transfer payments
The national debt on Naboo is $100 million, and the interest rate on that debt is 4%. When preparing the national budget, the government of Naboo forgot to include any provisions for paying down the national debt or any interest payments. If the government of Naboo wants to maintain a balanced budget and not add to the national debt, which of the following actions will be necessary?
Decrease government spending by at least $4 million
The government of Coruscant currently has a balanced budget. There is a national debt of $500 million which incurs 10% interest each year, but interest payments on the national debt are not currently included in the national budget. Which of the following will be necessary to reduce the size of the national debt?
Generate a surplus of more than $50 million
Chewbacca noticed that last year, the budget on his homeland Kashyyyk was balanced, while this year, its national debt increased. Which of the following scenarios would most likely have caused the increase in national debt?
Government spending increased by $100 million and tax revenue increased by $60 million
The government of Kashyyyk has a $200 million national debt which accrues 10% percent interest annually. The government would like to maintain a balanced budget and reduce the size of the national debt, but also does not want to change transfer payments. Which of the following actions will achieve the government of Kashyyyk's goals?
Increase tax revenues by more than $20 million
If an economy initially has a balanced budget, but its transfer payments increase, what happens to the budget balance and national debt?
There is a budget deficit; the debt will increase
The government of Cloud City spent $100 million more than it had in tax revenues this year. What is the impact of this shortage on the budget balance and national debt in Cloud City?
There is a budget deficit; the debt will increase
The government of Tatooine had a balanced budget last year. However, an unanticipated recession triggered by the wanton destruction of Jabba's Palace leads to a decrease in tax revenues, even though government spending and transfer payments did not change. What happens to the budget deficit and national debt in Tatooine as a result of the decrease in tax revenues?
There is a budget deficit; the debt will increase
