Question

suppose that waxwania is producing $550 of real gdp, whereas the potential real gdp (or full-employment real gdp) is $650. how large is its budget deficit? $ how large is its cyclically adjusted budget deficit? $ b. how large is its cyclically adjusted budget deficit as a percentage of potential real gdp? percent

Answer 1

The budget deficit is $100. The cyclically adjusted budget deficit is $100. The cyclically adjusted budget deficit as a percentage of potential real GDP is 15.38%.

Step-by-step explanation:

To calculate the budget deficit, subtract the real GDP from the potential real GDP. In this case, the budget deficit is $650 - $550 = $100.

To calculate the cyclically adjusted budget deficit, we need to compare the actual real GDP to the potential real GDP. The cyclically adjusted budget deficit is $650 - $550 = $100.

To calculate the cyclically adjusted budget deficit as a percentage of potential real GDP, divide the cyclically adjusted budget deficit by the potential real GDP and multiply by 100. In this case, the cyclically adjusted budget deficit as a percentage of potential real GDP is ($100 / $650) * 100 = 15.38%.