The government issues debt to finance its fiscal deficits

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Reference no: EM13800490

Suppose the government issues debt to finance its fiscal deficits. The interest rate in the government debt is r=5% and suppose that output in the US shrinks at rate n = -1%. Then:

a) The government can roll over its debt forever

b) The government can’t roll over its debt forever

c) The government will eventually default

d) The government debt is high

Reference no: EM13800490

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