Answered

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The economy of Rayton can be described by the following statistics:

Current real GDP = $10,000

Full employment real GDP = $12,000

Tax revenue = $3000

Government transfer payments = $1000

Government spending = $3000

a) In what stage of the business cycle is the Rayton economy? Explain.

b) What is the current budget balance in Rayton? Show your work.

c) Senator Fullington, an influential politician in Rayton, has argued that the budget must be

balanced. How could this be accomplished? How would balancing the budget affect real GDP in

Rayton?

Sagot :

Parrain

Based on the current real and the full employment real GDP, Rayton's economy is at a Recession stage.

The current budget balance in Rayton is -$1,000. The budget can be balanced by reducing government spending or increasing taxes. Both of these would decrease real GDP.

What does the economic data on GDP show?

The fact that the current real GDP is less than the full employment GDP shows that the nation is at a recession stage where it is underperforming.

What is the current budget balance?

This can be found as:

= Government revenue(taxes) - government spending

= 3,000 - 1,000 - 3,000

= -$4,000

In order to make a balanced budget where government revenue will equal government spending, the government either needs to reduce spending or increase revenue ( taxes ).

Increasing taxes or reducing spending, will lead to less money available for spending in the economy which will lead to a decrease in real GDP.

Find out more on government spending at https://brainly.com/question/25125137.

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