Deficits and Public Debt (CH 8)

Question 1

What is the modified government budget formula?

Answer 1

Budget = Inflows - Outflows

T- (G+TR + IPD) where TR = transfer payments IPD = interest on public debt

Question 2

Define government debt

Answer 2

accumulation of surpluses and deficits over time

deficit is usually annual

Question 3

How is debt measured accurately?

Answer 3

debt to GDP ratio

Question 4

What are the problems associated with debt?

Answer 4

with foreign debt, must make money within country to pay interest/ debt
interest payments first thing to be paid = cutbacks in G R TR
crowding out
intergenerational effects
if just paying interest, long term cash outflows and currency depreciation

Question 5

What is the Relative Per Capita Market Income (RCMI)

formula?

Answer 5

((Market Income in Region/Population in Region)/(Market Income in Nation/Population in Nation)) * 100

Question 6

What are the two categories of Relative Per Capita Market Income (RCMI)?

Answer 6

RPCMI > 100 denotes above average income (have province)

RPCMI < 100 denotes below average income (have not province)

Question 7

Define Net Federal Fiscal Balance (NFFB)

Answer 7

total money debt to federal government by region - total money inject by the federal government into region

Question 8

What does a positive NFFB and negative NFFB mean?

Answer 8

(+) NFFB denotes net contributor to confederation

(-) NFFB denotes net recipient from Confederation