Debt-income ratio constant

Reference no: EM13948425

1. A country is growing at 3% and has a debt/GDP ratio of 50%. Assuming no money nancing, what is the primary budget de cit/surplus that keeps the debt/income ratio constant when

(i) The real interest rate is 2%?

(ii) The real interest rate is 5%?

2. A country has 2% in ation, is growing at 2.5% and has a nominal interest rate of 6% and a debt/income ratio of 40%. It presently has a budget de cit as a percentage of GDP of 3% and involves no money nancing. This budget de cit exists for periods 0 to 5 and is then reduced to 1% for the next ve years. Plot the debt/income ratio for t =0 to 10.

3. Consider the numerical example in section 9.3.

(i) Suppose the debt/income ratio was to be stabilised at b =55%. What is the level of the primary de cit/surplus to GDP that will achieve this?

(ii) What is the primary de cit/surplus to GDP that will stabilise the debt/income ratio at 60%?

(iii) What do you conclude about a country's adjustment to its primary budget de cit/surplus if it waits until it reaches the debt/income ratio limit set under the Maastricht Treaty?

Reference no: EM13948425

Questions Cloud

What is the pooled variance for these two groups : The student wishes to test the null hypothesis is that there is no difference in A1C levels (the alternative hypothesis that there is a difference in A1C levels between the 2 groups). What is the critical t value for a t test that is testing the d..

Plot the van der pol equation : Plot the Van der Pol equation from the initial point (x(0),y(0))= (0.5,0.5) for the following values of µ. Take dt =0.01 and t from 0 to 1500

Determine to which caches requests urls will be directed : Determine to which caches requests for each of the following URLs will be directed

Sensitive to initial conditions : In each of the following let x(0)= 0.01, x(0)= 0.0105 and t from 0 to 50. (i) Show that x(t + 1)= 2.5x(t)(1 - x(t)) is not sensitive to initial conditions.

Debt-income ratio constant : 1. A country is growing at 3% and has a debt/GDP ratio of 50%. Assuming no money nancing, what is the primary budget de cit/surplus that keeps the debt/income ratio constant when (i) The real interest rate is 2%?

Which of the following is an element of compassion : Summarizing the worksheets provided in the text and identifying gaps that exist between the present self and the future self is called what? According to Meng, which of the following is an element of compassion

Value congruence in a cross cultural context : Value congruence in a cross cultural context - Support in reviewing Report of result and Analysis to ensure the numbers that are reported in the correct academic way

Economy in the numerical example : For the economy in the numerical example in section 9.3, where

What is the cause of an unfavorable volume variance : What is the cause of an unfavorable volume variance? Does the volume variance convey any meaningful information to managers?

User Account

All Pages