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Refer to the following table for Waxwania:
Refer to the following table for Waxwania:Government Expenditures, G Tax Revenues, T Real GDP
$190 $110 $550
190 130 650
190 150 750
190 170 850
190 190 950
Instructions: In part a, enter your answers as whole numbers. In part b, round your answer to 2 decimal places.
a. Waxwania is producing $650 of real GDP, whereas the potential real GDP (or full-employment real GDP) is $750 . How large is its budget deficit?
How large is its cyclically adjusted budget deficit?
b. How large is its cyclically adjusted budget deficit as a percentage of potential real GDP?
c. Is Waxwania’s fiscal policy expansionary or is it contractionary?
A. Thecyclically AdjustedBudgetDeficitis $160 billionB. Cyclically Adjusted Budget Deficit as a Percentage ofPotential Real GDP= 21.33%C. The cyclically adjustedbudget deficitis $160 billion, indicating an expansionaryfiscal policy.A. The budget deficit can be calculated as the difference betweengovernment expenditures(G) andtax revenues(T).Budget Deficit = G - TFor the given values:Budget Deficit= $190 - $130 = $60 billionTo calculate the cyclically adjusted budget deficit, we need to consider the potential real GDP (PRGDP) and the output gap (OG). The output gap is the difference between actual real GDP and potential real GDP.Output Gap(OG) =Actual Real GDP-Potential Real GDPIn this case, the output gap is:OG = $650 - $750 = -$100 billion (negative because actual GDP is below potential GDP)Cyclically Adjusted Budget Deficit =Budget Deficit- (Output Gap)Cyclically Adjusted Budget Deficit = $60 billion - (-$100 billion) = $160 billionB. To calculate the cyclically adjusted budget deficit as a percentage of potential realGDP, we can use the following formula:Cyclically Adjusted Budget Deficit as a Percentage ofPotential Real GDP= (Cyclically Adjusted Budget Deficit / Potential Real GDP) * 100Using the given values:Cyclically Adjusted Budget Deficit as a Percentage of Potential Real GDP = ($160 billion / $750 billion) × 100 = 21.33%C. Waxwania'sfiscal policycan be determined based on the cyclically adjusted budget deficit.If the cyclically adjusted budget deficit is positive, it indicates an expansionary fiscal policy. This means that thegovernmentisspendingmore than it is collecting in taxes, which can stimulate the economy.In this case, the cyclically adjusted budget deficit is $160 billion, indicating anexpansionary fiscal policy.Learn more aboutgovernment expenditureshere:brainly.com/question/31442211#SPJ12...