3. Can a government run persistent budget deficit? Can national debt growforever without bankrupting the nation? Let D(t), y(t), and r be theamount of debt at year t, national income at year t, and interest rate ondebt per-year, respectively, with D(0) = 0 and y(0) = 1. Here bankruptcymeans whether the ratio of interest payment to national income will exceedone i.e. rD(t)/y(t) > 1 at some year. Suppose that time path of debt isgiven byD = by(t), b > 0||and the time path of income is given byģ = gy(t), g > 0.(a) How does the time path of rD(t)/y(t) look like?(b) What is the steady-state value of rD(t)/y(t)?(c) Does it exceed one? Interpret your result.

Budget deficit refers to a condition that occurs when a government's expenditures exceed its…

Answered: (a) How does the time path of…

(a) How does the time path of rD(t)/y(t) look like? (b) What is the steady-state value of rD(t)/y(t)? (c) Does it exceed one? Interpret your result.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: A local minor league baseball team plays home games in a stadium that has four sections that each…

A: The attendance in section four (lowest section) is 2,500. Attendance in third, second and first…

Q: do you get from step 3 to step 4 - (-11)/5

A: Price elasticity of demand measures the quantitative relationship between the price and quantity…

Q: A company has a contribution/sales ratio of 40%. It maintains a margin of safety of 20%. If its…

A: Given the data:Contribution/Sales (or Contribution Margin) Ratio (P/V Ratio): 40% or 0.40Margin of…

Q: The following utility functions are defined over three goods, x, y, and z. Calculate the demand…

A: Demand for the goods is achieved at the optimal state where the Marginal Utility per dollar for…

Q: Given EVM data, estimate the cost at completion of a project using the method "EAC based on combined…

A: Estimate at completion is the tool used by businesses to calculate the cost involved in the…

Q: Which one of these is false when compared to the relationship between marginal and average product?…

A: The marginal product of labor refers to the additional output produced when an additional unit of…

Q: reg infl infoprov access staff int_cso int_cor pom if sample==1 & io==4, robus Linear regression…

A: A linear regression analysis output interpretation should be used to determine which variable (or…

Q: Suppose an individual consumes goods and y and has income I. The prices are pr and py respectively.…

A: All commodity bundles with the same utility level are shown by the utility function. A graphical…

Q: The following table lists the components needed to assemble an end item, lead times (in weeks), and…

A: Given that, lead time for End item = 1 week highest lead time for components L, C, and K = 3 weeks…

Q: The per capita energy consumption level (in kilowatt-hours) in a certain country for a recent year…

A: Normal distribution is the distribution of a data set with no skewness involved. All measures of…

Q: Methods or techniques applied in maximizing of minimizing an objective function. *

A: Maximizing or minimizing an objective function means the maximum or the minimum possible value that…

Q: Using the Table below, what is the earliest completion time for this project? Activity Predecessor…

Q: Only typed solution

A: The objective of the question is to derive the steady state capital per worker (k) from the given…

Q: Air is heated as it flows Student question Time Left: 00:09:35 Training subsonically through a…

A: For reference giving table

Q: Complete the following table by deriving the marginal tax rates in the income ranges of $20,000 to…

A: Marginal tax rate and average tax rate formula can be written as follows:

Q: (a) Find the average rate of change (in $ per unit) of C with respect to x when the production level…

A: Marginal cost addresses the incremental costs caused while producing extra units of a good or…

Q: Expand the following expressions: a) (5x-44)(5x+43) 2 <) (a + 3b)

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: A small company of science writers found that its rate of profit (in thousands of dollars) after t…

A: dPdt=(3t+6)(t2+4t+6)14

Q: Your economics textbook hit the market with a bang, selling 10856 copies in its debut year. The…

A: Sales is the exchange of commodities. Price is the contract to sell the goods in the market. It is…

Q: New ads have been proposed and cost the company $5000 to run in each time slot. If the extra sales…

A: To determine how many ads should be run, we need to find the number of ads that will maximize the…

Q: The equation p(x)= −40?^2 + 8000? − 250000 takes x, the number of items produced of a particular new…

A: Maximum profit is a price goal where a company wants to make as much profit as feasible as soon as…

Q: Find f'(x). f(x) = 9x* (x³ - 6) 3 f'(x) = 63x° - 216x

A: The increasing or decreasing function depends upon the second derivative. It means as the second…

Q: No chatgpt used i will give 5 upvotes typing please

A: Given: frequency (f) = 6 GHz (giga hertz) = 6 x 109 Hzrelative permittivity (εr)= 2.25speed of…

Question

3. Can a government run persistent budget deficit? Can national debt grow
forever without bankrupting the nation? Let D(t), y(t), and r be the
amount of debt at year t, national income at year t, and interest rate on
debt per-year, respectively, with D(0) = 0 and y(0) = 1. Here bankruptcy
means whether the ratio of interest payment to national income will exceed
one i.e. rD(t)/y(t) > 1 at some year. Suppose that time path of debt is
given by
D = by(t), b > 0
||
and the time path of income is given by
ģ = gy(t), g > 0.
(a) How does the time path of rD(t)/y(t) look like?
(b) What is the steady-state value of rD(t)/y(t)?
(c) Does it exceed one? Interpret your result.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Explain budget deficit

VIEW

Step 2: Express time path

VIEW

Step 3: Determine steady state

VIEW

Step 4: Determine whether the ratio exceeds

VIEW

Solution

VIEW

Step by step

Solved in 5 steps with 17 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

I leave a like on all sections for your assistance, thank you.WATER TREATMENT PLANT PROCESS COSTSInformation: (Please see the attached image depicting the schematics + Text) The results obtained from the four operating modes showed that the hardness decreased by 4.7% when both processes were in operation (i.e., sludge recirculation and aeration). When only sludge was recirculated, the reduction was 3.8%. There was no reduction due to aeration only, or when there was neither aeration nor recirculation. For turbidity, the reduction was 28% when both recirculation and aeration were used. The reduction was 18% when neither aeration nor recirculation was used. The reduction was also 18% when aeration alone was used, which means that aeration alone was of no benefit for turbidity reduction. With sludge recirculation alone, the turbidity reduction was only 6%, meaning that sludge recirculation alone actually resulted in an increase in turbidity-the difference between 18% and 6%. Since…
Only typed solution
Let f(t) be the balance in a savings account at the end of t years and suppose y = f(t) satisfies the differential equation y' = 0.05y - 12,500. (a)Suppose that after one year the balance is $230,000. Is the balance increasing or decreasing at that time? At what rate is it increasing or decreasing at that time? (b)Write the differential equation in the form y' = k(y - M). (c)Describe the differential equation in words. %3D %3D (a) The balance is decreasing at a rate of $ - 1000 per year. (b) y' = .05(y - 230000) (c) Choose the correct answer below. A. The rate of change of the savings account balance is proportional to the balance at the end of t years and is always increasing. B. The rate of change of the savings account balance is proportional to the difference between the balance at the end of t years and $250,000. C. The rate of change of the savings account balance is proportional to the balance at the end of t years and is always decreasing. D. The differential equation gives the…
Answer All parts show steps
The capital share in Peru is a = 2/3. Relative to last year, capital in- creased by 20%, labor hours increased by 10%, and total output increased by 25%. Which is the closest approximation number for the growth in Total Factor Productivity, A? (a) -5% (b) 11.6% (c) 8.3% (d) 0%
Find f'(x). 2 X +2 f(x) = 7x - 6 f'(x) = %3D
Lifewear, a manufacturer of women's sports clothes, is considering adding a line of skirts and jackets. The production would take place in a part of its factory that is currently not being used. The first output would be available in time for the 2021 fall season. The following information is available. Answer parts (a) through (d). New Product Line Information First cost in 2020 ($) 15,100,000 Planned output (units/year) 324,000 Observed, current dollar MARR before tax Study period Materials 0.25 6 years Year 2020 Prices ($/unit) Labour 12 8.25 35 Output a. What is the real internal rate of return? (This is most easily done with a spreadsheet.) The real internal rate of return is about percent. (Round to one decimal place as needed.) b. What inflation rate will make the real MARR equal to the real internal rate of return? The inflation rate would need to be about percent. (Round to two decimal places as needed.) c. Calculate the present worth of the project under three possible future…