HARD
12TH CBSE
IMPORTANT
Earn 100

'The fiscal deficit gives the borrowing requirement of the government'. Elucidate.

Important Questions on Government Budget and the Economy

MEDIUM
12TH CBSE
IMPORTANT
Give the relationship between revenue deficit and fiscal deficit. 
HARD
12TH CBSE
IMPORTANT
Suppose that for a particular economy, investment is equal to 200, government purchases are150 , net taxes (that is lump-sum taxes minus transfers) is 100 and consumption is given by C=100+0.75Y (a) What is the level of equilibrium income? (b) Calculate the value of the government expenditure multiplier and the tax multiplier. (c) If government expenditure increases by 200, find the change in equilibrium income.
HARD
12TH CBSE
IMPORTANT

Consider an economy described by the following functions: C = 20+0.80Y, I = 30, G =50, TR = 100

(a) Find the equilibrium level of income and the autonomous expenditure multiplier in the model.

(b) If government expenditure increases by 30, what is the impact on equilibrium income?

(c) If a lump-sum tax of 30 is added to pay for the increase in government purchases, how will equilibrium income change?

HARD
12TH CBSE
IMPORTANT
Consider an economy described by the following functions: C = 20+0.80Y, I = 30, G = 50, TR = 100. Calculate the effect on the output of a 10 per cent increase in transfers and a 10  per cent increase in lump-sum taxes. Compare the effects of the two.
HARD
12TH CBSE
IMPORTANT
We suppose that C = 70 + 0.70Y D, I = 90, G = 100, T = 0.10Y (a) Find the equilibrium income. (b) What are tax revenues at equilibrium income? Does the government have a balanced budget?
HARD
12TH CBSE
IMPORTANT
Suppose marginal propensity to consume is 0.75 and there is a 20 per cent proportional income tax. Find the change in equilibrium income for the following (a) Government purchases increase by 20 (b) Transfers decrease by 20.
HARD
12TH CBSE
IMPORTANT
Explain why the tax multiplier is smaller in absolute value than the government expenditure multiplier.
HARD
12TH CBSE
IMPORTANT
Explain the relation between government deficit and government debt.