An Economy Has Potential Output of 100,actual Output of 90

question 9

Multiple Choice

An economy has potential output of 100,actual output of 90 and tax revenue of 50.The current government deficit is zero,what is the structural deficit if the elasticity of revenue with respect to out is 0.5 whilst the elasticity of spending with respect to output is -0.25?

• A) 0
• B) -1
• C) -2
• D) -3
• E) -4

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Definitions:

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the appropriate periods.

Debt Investments

Financial investments in debt instruments, such as bonds or mortgages, where the investor lends money to a borrower in exchange for interest payments.

Unrealized Loss

A loss that results from holding onto an asset that has decreased in price, but has not actually been sold for a loss.

Available-For-Sale Securities

Financial assets that are intended to be sold in the short term, not held to maturity, and are recorded at fair market value.