At the beginning of year one, there is no government debt outstanding. The government runs a $100 billion deficit in year one. Interest at a nominal rate of 10% must be paid starting in year two
Assume nominal GDP in year one is $2000 billion and the nominal growth rate of GDP is 4%. Assume the government balances its primary budget in the future and the interest rate and growth rate do not change. (a) What will be the government deficit in years two, three, four, and five? (b) What will be the value of government bonds outstanding at the end of the fifth year? (c) What will be the debt—GDP ratio at the end of year five?
(a) $10, $11, $12.1, $13.31 (all in billions)
(b) $146.41 billion
(c) 0.0626
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Which of the following will cause the demand curve for gasoline to shift leftward?
a. a decrease in the price of gasoline b. an increase in the price of gasoline c. a leftward shift of the supply of gasoline d. a rightward shift of the supply of cars e. a decrease in the price of bicycles
Consider two resource markets in which the demand curves slope downward. In market A, the supply curve is horizontal, equilibrium price is $6, and 100 units of the resource are hired. In market B, the supply curve is vertical, equilibrium price is $20, and 30 units of the resource are hired. Which of the following is true?
a. All of the resource earnings in market A are economic rent. b. All of the resource earnings in both markets are economic rent. c. All of the resource earnings in market B are economic rent. d. None of the resource earnings in either market is an opportunity cost. e. None of the resource earnings in either market is economic rent.
If the British pound appreciates, U.S. television stations need fewer dollars to buy episodes of a Britcom from the British Broadcasting Company
a. True b. False
Economists who believe that market concentration is not harmful to a country's economic well being
a. favor laissez-faire government policies b. think that markets should be regulated c. think that the government should own those monopolies d. like the idea of price controls e. are nonexistent