Explain how it is possible for the government debt to grow forever
The debt can grow because the economy grows. If, for example, nominal GDP grows at 3 percent per year, and the debt also grows at 3 percent per year, then the debt will be a constant fraction of GDP. This is perfectly sustainable. Problems arise only if the debt grows faster than GDP. Such a situation cannot prevail forever, because that would imply that the debt would eventually be many times larger than GDP, and the government would no longer be able to pay the interest payments on its debt.
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How does slow price adjustment, as assumed in Keynesian models, result in real economic variables being affected by nominal variables?
What will be an ideal response?
Marge Sampson produces and sells 400 jars of homemade jelly each month for $3 each. Each month, she pays $200 for jars, $150 for ingredients, and uses her own time, with an opportunity cost of $500 . Her economic profits each month are:
a. $350. b. $500. c. $650. d. $700.
Jill and Daniel graduate from college in the same year in economics and physics respectively and start looking for jobs. They are competitors in the job market
Indicate whether the statement is true or false
The change in consumption divided by a change in income is called the
a. consumption function b. marginal propensity to consume c. marginal propensity to spend d. spending function e. changing propensity to consume