Assuming the UK economy taxes and government spending at equilibrium level of output for 2021 is each 10 trillion, use the cyclically adjusted budget deficit formula [()() [() ()] ()] to work out questions 'a to d' below. (Hint:= taxes net of transfers; and alpha () = 1; consumption and investment are assumed unchanged):

ii(a) Derive and explain the kind of budget implemented by the UK government and by how much if actual output generated is 18.0 trillion (show all workings) -

ii(b) Derive and explain the kind of budget implemented by the UK government and by how much if actual output generated is 6.0trillion (show all workings) -

(iii) Using the debt dynamics equation: = + ( ), discuss three options available to the government to balance the 'question 'ii(b)' economy:

(iv) what is the least painful option in the answer you gave for question 'iii', and why?