- (G+19) d) Given a government budget constraint of B³ = B₁₁ + rB₁₁ +T Where Bs is the government's stock of net financial assets, G is government consumption spending, 19 is government investment expenditures, and T represents taxes net of transfers. i. ii. iii. Rewrite this equation to reflect that the government's net debt is equal to the budget deficit. Derive and explain the government debt-GDP ratio. Given that an economy has an initial public debt/GDP of 60%. At an initial long-run economic growth rate of 2% and an initial public expenditures/GOP of 21% (giving a primary budget deficit of 1%), indicate if debts of this economy are sustainable. e) Given a government intertemporal budget constraint of: G₁ +19 + G₂+1 (1+r) = T₁+ T2 (1+r) + D (1+r) use the principle of the Ricardian Equivalence to determine if fiscal policy has effects on households' intertemporal budget constraint.
- (G+19) d) Given a government budget constraint of B³ = B₁₁ + rB₁₁ +T Where Bs is the government's stock of net financial assets, G is government consumption spending, 19 is government investment expenditures, and T represents taxes net of transfers. i. ii. iii. Rewrite this equation to reflect that the government's net debt is equal to the budget deficit. Derive and explain the government debt-GDP ratio. Given that an economy has an initial public debt/GDP of 60%. At an initial long-run economic growth rate of 2% and an initial public expenditures/GOP of 21% (giving a primary budget deficit of 1%), indicate if debts of this economy are sustainable. e) Given a government intertemporal budget constraint of: G₁ +19 + G₂+1 (1+r) = T₁+ T2 (1+r) + D (1+r) use the principle of the Ricardian Equivalence to determine if fiscal policy has effects on households' intertemporal budget constraint.
Chapter1: Making Economics Decisions
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(G+19)
d) Given a government budget constraint of B³ = B₁₁ + rB₁₁ +T
Where Bs is the government's stock of net financial assets, G is government
consumption spending, 19 is government investment expenditures, and T
represents taxes net of transfers.
i.
ii.
iii.
Rewrite this equation to reflect that the government's net debt is equal to
the budget deficit.
Derive and explain the government debt-GDP ratio.
Given that an economy has an initial public debt/GDP of 60%. At an
initial long-run economic growth rate of 2% and an initial public
expenditures/GOP of 21% (giving a primary budget deficit of 1%),
indicate if debts of this economy are sustainable.
e) Given a government intertemporal budget constraint of:
G₁ +19 +
G₂+1
(1+r)
=
T₁+
T2
(1+r)
+
D
(1+r)
use the principle of the Ricardian
Equivalence to determine if fiscal policy has effects on households' intertemporal
budget constraint.
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