Discuss the economy of canada

Reference no: EM133469401

Assignment:

1. If at the beginning of the year the public debt is $15 trillion. This year government spending is $2 trillion and transfers are $1 trillion, and tax revenues are $7 trillion. Suppose that there is an annual interest rate of 8% of debt added on at the end of the year. If GDP is $500 trillion, calculate the debt to GDP ratio at the end of the year.

2. Suppose that the typical Canadian spends 70 percent of their income. There is an income tax rate is 8% per period. If the government wanted to see the effect of a tax cut of $80 billion, what would be the tax multiplier that they would have to use.

3. Consider the economy of Canada. Its households spend 55% of increases in their income and saves 45%. There are no taxes and no foreign trade. Currently, Canada has a recessionary gap, the governments aim is to get actual output to increase by 200 billion dollars. How much of a tax cut do they need to have to achieve the overall increase in output of 200 billion dollars?

Reference no: EM133469401

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