The following Table presents an overview of a hypothetical Government\'s budgeta
ID: 2657776 • Letter: T
Question
The following Table presents an overview of a hypothetical Government's budgetary op- erations. Assume that a positive budgetary balance during a fiscal year is used entirely to reduce the public debt at the end of that year Projected changes from fiscal year 2014-2015 to fiscal year 2015-2016 are Revenues are expected to increase by 3%. Program expenditures are expected to increase by 4%. Actual GDP is expected to increase by 5%. The interest rate on the public debt is expected to . . from 7.4% to 7.2%. 2013-20142014-2015 udgetary variabl ns Revenues ($) Program expenditures (S) Primary balance (S) Public debt servicing (S) Budgetary balance ($) Government debt ($) Actual GDP Growth rate of actual GDP Interest rate on public debt( Public debt/GDP 124.3 47.4 39.3 8.2 507.7 1087.5 2.9 7.6 46.7 133.3 44.3 37.3 7.0 500.7 1132.8 4.2 7.4 44.2 5.0 7.2 32. In fiscal year 2015-2016, the primary balance (to the closest second decimal) is expected to be a. $36.21 b. 37.66 ?. 39.43 d. 42.52 33. In fiscal year 2015-2016, total government debt (to the nearest second decimal) is expected to be 91P age ÔneClass find more resources at oneclass.com eClasS find more resources at oneclass.com Pink Assignment a. $494.23 b. 498.44 C. 499.48 d. 500.54 34. In fiscal year 2015-2016, servicing (interest cost) the public debt (to the nearest decimal) is expected to be a. 33.58% b. 36.05 ?. 37.34 d. 38.32 second 35. In fiscal year 2015-2016, the percentage of public debt to actual GDP (to the nearest second decimal) is expected to be a. 40.46% b. 40.59 c. 41.25 d. 41.55 0-0-0Explanation / Answer
1- Revenues are expected to increase by 3%
Revenues Projections (2015-16) = 177.6*(1+.03) = 182.9
Program Expenditures are expected to increase by 4%
Program Expenditure Projections (2015-16) = 133.3*(1+.04) = 138.6
Primary Balance = Revenues – Program Expenditures = 182.9 – 138.6
= 44.3
2- Assumption of positive budgetary balance used to reduce Public 9Government Debt:
Government Debt (2015-16) = Government Debt (2014-15) – Budgetary Balance (2014-15)
= 500.7 – 7 = 493.70
3- Public Debt Servicing = Government debt ($) * (Interest rate on public debt /100)
= 493.7 * (7.2/100) = 35.55
4- Public Debt / GDP = Government debt / Actul GDP = 493.7 / (GDP (2014-15) * (1.05))
=493.7 / (1132.8 *1.05) = 493.7 / 1189.44 = 41.50 %