Econ420S10_HW9_Solution

Econ420S10_HW9_Solution - Economics 420 Spring 2010 Mike...

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Unformatted text preview: Economics 420 - Spring 2010 Mike Aguilar Intermediate Theory: Money, Income & Employment UNC at Chapel Hill HW # 9 Due - 04/19/2010 Instructions : • Please explain your answers thoroughly and show all necessary work. • State your assumptions carefully. • There may be more than one correct solution. • Please type your answers whenever possible. • Students may work together, but each must submit their own work. • The honor code is in effect. • Note: Maintain a ceteris paribus assumption when interpreting all shocks. 1. (5pts) The CBO (Congressional Budget Office) forecasts federal government spending for 2010 to be $1 , 371 billion. Moreover, the CBO forecasts transfers to be $1 , 946 billions and government revenues to be $2 , 175. Also consider the fact that the level of federal government debt held by the public was $7 , 544 billion at the end of 2009. Lastly, note that the 10-year Treasury bond yield, which can be used as a proxy for the nominal interest rate, as of 04/08/10 was i = 3 . 91%. Using the data given above, determine how fast GDP must grow in 2010 such that the Debt to GDP ratio does not change between 2009 and 2010. To facilitate your computations, you may choose among the following possible growth rates: 4% , 9% , 14%...
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Econ420S10_HW9_Solution - Economics 420 Spring 2010 Mike...

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