Identify the budget position for all three years from Table 3.

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a) Step 1: Identify the budget position for all three years from Table 3. The budget position for 2024, 2025, and 2026 are −K3.4b, −K2.6b, and −K3.2b respectively. Since all values are negative, PNG has run a deficit in all three years. Step 2: Calculate the average annual deficit. Average annual deficit = ((−3.4) + (−2.6) + (−3.2))/(3); Average annual deficit = (−9.2)/(3) Average annual deficit ≈ −K3.07b b) i) The tax structure shown in Table 4 is a progressive tax. This is because the tax rate increases as the annual taxable income increases. For example, income between K10,001 and K20,000 is taxed at 22%, while income above K70,000 is taxed at 40%. ii) This type of tax is considered fairer than a flat-rate tax because it adheres to the ability-to-pay principle. Higher-income earners contribute a larger percentage of their income in taxes, which is generally seen as more equitable as they have a greater capacity to bear the tax burden without significantly impacting their basic needs. c) One economic risk of public debt rising as a percentage of GDP is an increase in interest payments on the debt, which diverts government funds away from essential public services or investments. One fiscal policy action the PNG government could take to address this trend is to reduce government expenditure by cutting spending on non-essential programs or improving efficiency in public services.

Identify the budget position for all three years from Table 3.

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Step-by-step solution

Part a· 2 steps

Identify the budget position for all three years from Table 3.

Calculate the average annual deficit.

Part b(i)

Part c

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