Principles of Macroeconomics (11th Edition)
11th Edition
ISBN: 9780133023671
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 9, Problem 1P
To determine
Accumulated debt and size of budget.
Expert Solution & Answer
Explanation of Solution
Debt at the end of year 1 is 1 million lavs.
Debt at the end of year 10 is 10 million lavs.
The interest rate on debt in year 10 is 500,000 lavs
Thus the government will be spending 10,500,000 lavs
The taxes at the end of year 10 is 9 million lavs.
The taxes are raised to cover interest payments each year so that the budget deficit remains at 1,000,000
Economics Concept Introduction
Concept introduction:
Budget deficit: Budget deficit is a situation in which the expenditure of the government exceeds the revenue of the government.
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Chapter 9 Solutions
Principles of Macroeconomics (11th Edition)
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