Suppose in a country the real growth rate is 4 and the real

Assignment Help Business Economics

Reference no: EM13351503

Suppose in a country the real growth rate is 4% and the real interest rate is 6%.

(a) Calculate the constant debt-GDP ratio that the country can achieve if the country runs a primary budget deficit of 3%. Is this debt-GDP ratio stable, i.e., if the debt changes slightly the debt- GDP ratio gravitates towards this constant ratio or the debt- ratio increases or decreases without a limit? Explain using appropriate calculations and a graph.

(b) Now suppose the country runs an austerity program and begins to maintain a primary surplus of 2%. Calculate the constant debt-GDP ratio that the country can achieve. Is this debt-GDP ratio stable? Explain using appropriate calculations and a graph.
(ii) Now suppose the country follows an expansionary monetary policy that lowers the real interest to 2%, while real growth rate remains at 4%.

(c) Calculate the constant debt-GDP ratio that the country can achieve if the country runs a primary budget deficit of 3%. Is this debt-GDP ratio stable? Explain using appropriate calculations and a graph.

(d) Now suppose the country begins to maintain a primary surplus of 2% after pursuing a stringent fiscal policy. Now, calculate the constant debt- GDP ratio that the country can achieve. Is this debt-GDP ratio stable? Explain using appropriate calculations and a graph.

Reference no: EM13351503

Questions Cloud

Q recognizes true statements of cholesterol and its : q. recognizes true statements of cholesterol and its fluidity.1. cholesterol decreases membrane fluidity in areas

Efficient markets hypothesis you invest 10000 in the market : efficient markets hypothesis you invest 10000 in the market at the beginning of the year and by the end of the year

Q1 what would occur to the preferred habitat of your plant : q1. what would occur to the preferred habitat of your plant red maple in case of partial water drainage of the mer

Mustard and mayonnaise are substitutes mustard and relish : mustard and mayonnaise are substitutes. mustard and relish are complements. mustard is a normal good. during the summer

Suppose in a country the real growth rate is 4 and the real : suppose in a country the real growth rate is 4 and the real interest rate is 6.a calculate the constant debt-gdp ratio

Q frank found himself in the midst of an ethical dilemma at : q. frank found himself in the midst of an ethical dilemma at work and was using an ethical decision-making matrix to

1 which of the following is not a high energy density : 1 which of the following is not a high energy density source of energya solar energyb nuclear energyc all of the

Q which of the follow statements regarding cancer risk : q. which of the follow statements regarding cancer risk factors is false?select one answer.a. factors that alter dna

The net profit earned in business rs 60000 but the net : the net profit earned in business rs 60000 but the net sales occurred during the year are rs. 300000.compute the net

User Account

All Pages