For all the questions below select the appropriate answer:

Question 6 [5 points] For all the questions below select the appropriate answer: a) The budget function BB + BB = 0.25Y 150 Y The diagram illustrates the government budget function: BB = 0.25Y - 150. If the actual equilibrium GDP in the economy is 500 and estimated potential GDP is 700: O the structural budget balance is a surplus of 25 but the actual budget balance is a decit of 25. O the economy is experiencing an inationary gap. 0 the structural budget balance and the actual budget balance are equal at a surplus of 50. O the structural budget balance is 0 but the actual budget balance is a surplus of 25. b) Suppose the MP0 and the slope of the AE function are 0.8, giving a multiplier of 5.0. Then a newly formed government introduces a net tax on national income, NT = 0.2Y. As a result: 0 the slope of the AE function increases to 1.0, the multiplier and equilibrium national income both increase. 0 the slope of the AE function decreases to 0.64, the multiplier decreases to 1.56 and equilibrium national income decreases. O the slope of the AE function decrease to 0.64, the multiplier decreases to 2.78 and equilibrium national income decreases. O the slope of the AE function is unchanged, the multiplier remains 5.0 and equilibrium national income is not affected. c) In Canada, surpluses over the past 10 years in the federal government's budget have: 0 reduced the public debt and the ratio of the public debt to GDP. 0 resulted from increased government expenditure without an increase in tax rates. 0 increased the public debt and the ratio of public debt to GDP without affecting government expenditures or the tax rate. 0 educed government expenditures, increased tax rates and increased the ratio of public debt to GDP . d) If the MPC is 3/4, the net tax rate is 1/3, and the government increases spending by $100 million, then we would expect the result to be: O a reduction in equilibrium real GDP of $400 million. O no change in equilibrium real GDP. O an increase in equilibrium real GDP of $250 million. O an increase in real GDP of $200 million. e Real GDP C I G NT X IM 0 100 150 75 0 50 0 100 175 150 75 10 50 25 200 250 150 75 20 50 50 400 400 150 75 40 50 100 Based on the data for an open economy in the table presented: O the multiplier is 2.4 and equilibrium real GDP is 908. O the multiplier is 3.6 and equilibrium real GDP is 757. O the multiplier is 1.7 and equilibrium real GDP is 652. O the multiplier is 4.0 and equilibrium real GDP is 425