Please Read the Following Paragraph and Answer the Following Questions

Omans government will finance most of its budget shortfall in 2021 by borrowing to plug a fiscal gap battered by a decline in oil prices and the coronavirus pandemic.

The Persian Gulf state is looking into borrowing that will cover 73%, or 1.6 billion rials ($4.2 billion), of the countrys 2.2 billion-rialshortfall, with the remaining 600 million rials to be drawn from its reserves, according to a post on Twitter by the state-run Oman News Agency on Friday. The government based its 2021 budget plan on an oil price of $45 per barrel.

Other highlights from Omans 2021 budget:

Expenditure is set to fall to 10.8 billion rials, a 14% drop from the previous year.

2021 revenue is set to fall to 8.6 billion rials, a 19% decline.

Budget deficit at 8% of gross domestic product in 2021, 2.2 billion rials.

Oman has taken measures such as reduced spending and plans to impose a 5% value-added tax in 2021. It will implement developmental projects valued at 371 million rials as part of the effort to redirect resources toward national priorities, according to the Oman News Agency.

The sultanates economy is estimated to have shrunk 10% in 2020, according to projections from the International Monetary Fund, among the steepest in the Gulf. Bond spreads in the nation have increased in 2020 compared to neighbors and while financial buffers remain ample in Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, they are significantly weaker in Bahrain and Oman, according to a report by the fund.

Instructions for the completion of Assignment:

Please read the paragraph given above and answer the following questions. Each question carries five marks.

1. Analyze the type of budgeting discussed in the paragraph. Justify your answer with points from the paragraph

2. Analyze the impact of government spending on the Aggregate Demand.