How much interest will the government pay each year

Reference no: EM13183140

Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $10 billion while raising only $8 billion worth of taxes.

a) What will be the government's deficit?

b) If the government finances the deficit by issuing bonds, what amount of bonds will it issue?

c) At a 10 percent rate of interest, how much interest will the government pay each year?

d) If this same budget deficit occurs for a second year, what would the national debt become? And at a 10 percent rate of interest, now how much interest would have to be paid by the government each year?

Reference no: EM13183140

Questions Cloud

Complete and balance the equation redox reaction : redox reaction NO2- is oxidized to NO3 and Ag is reduced to Ag. Complete and balance the equation for this reaction in basic solution

How much would cost to fence in four square miles : There are economies of scale in ranching, especially with regard to fencing land. Suppose that barbed-wire fencing costs $10,000 per mile to set up. How much would it cost to fence a single property whose area is one square mile if that property a..

Explain what is a significant obstacle when using osmometry : What is a significant obstacle when using osmometry to determine molar masses for compounds with very high molar masses? A. The osmotic pressures may be too high to measure.

HR software supplier and maintenance services : There are several important questions to ask during the selection process such as does the HR software supplier offer support and maintenance services? If so, what is the cost? How could the answer to this question impact the decision? (150 words)

How much interest will the government pay each year : At a 10 percent rate of interest, how much interest will the government pay each year? d) If this same budget deficit occurs for a second year, what would the national debt become? And at a 10 percent rate of interest, now how much interest would ..

The henderson and hasselbalch equation to compute the ph : Use the Henderson and Hasselbalch equation to calculate the pH of a buffer solution that is 0.45 M in NH4Cl and 0.15 M in NH3

What deposit must be made each month until the man retires : A Man is planning to retire in 20 years. He can deposit money for his retirement at 6% compounded monthly. It is estimated that the future general inflation rate will be 5% compounded annually. What deposit must be made..

Various stages of the project life cycle : Evaluate the importance of understanding the various stages of the project life cycle and its possible contributions to a project. Note: 200 words. Pls cite your source.

Explain the voltaic cell in acidic solution : Write the balanced equation for the net cell reaction for the voltaic cell in acidic solution. (First two are the anode, last two are the cathode)

User Account

All Pages