The Table Below Shows the Relationship Between the Deficit and Real

question 42

Essay

The table below shows the relationship between the deficit and real GDP. Draw a diagram depicting this relationship. Assume potential GDP is $6,900 billion. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Real GDP (billions of } \\\text { dollars) }\end{array} & \begin{array} { c } \text { Deficit (billions of } \\\text { dollars) }\end{array} \\\hline 6,750 & 280 \\\hline 6,825 & 260 \\\hline 6,900 & 240 \\\hline 6,975 & 220 \\\hline 7,050 & 200 \\\hline\end{array}$$ (A) What is the structural deficit?
(B) If real GDP is \$7,050 billian, what is the cyclical deficit?
(C) If real GDP is \$6,750 billian, what is the cyclical deficit?
(D) Show what will happen to the relationship between the deficit and real GDP if Medicare and federal prison incarceration costs increase writhout any carresponding increase in tares or reduction in ather proprams.

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Definitions:

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenue.

Cumulative

Refers to the aggregate amount that has been gathered or accumulated over time.

Par Value

A nominal or face value assigned to a share of stock or a bond by the issuing company, often unrelated to its market value.

Common Stock

A type of security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.