In the basic Keynesian model, fiscal policy should not cause an increase in the public debt. However, in this course you have learnt that most national governments have accumulated public debt by mis-using the Keynesian model. The worst example cited is that of Greece. Explain why governments find it difficult if not impossible to use fiscal policy without accumulating debt. Explain how discretionary fiscal policy is different from automatic stabilizers. Which one is the more likely to cause the debt accumulation problem in part A? Explain why a foreign debt is worse than a domestic debt.

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