November 16 notes

November 16 notes - Deficits and Debt Required Reading...

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Deficits and Debt Required Reading Chapter 16
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Motivation •H a v e d i s c u s s e d F i s c a l P o l i c y ¾ Changes in a v e n o t d i s c u s s e d ¾ Government Budget Deficits ¾ Accumulation of the National Debt •W h a t a r e t h e E f f e c t s o f D e f i c i t s a n d t h e Accumulation of the National Debt on the economy? , , , or GTRTX t
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Measurement: Government Budget Definitions: G = Government Purchases TR = Transfer Payments InP = Interest Payments on the National Debt TX = Tax Revenues Spend = G ± N Re Spend overnment Spending Rec = Government Receipts Bud = Government Budget Bud = c GT R I n P T X ±² ² ³ ±²²³²²´
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N Re Spend Bud = When Spend > Rec Bud > 0 Deficit When Spend < Rec Bud < 0 Surplus When Spend = Rec Bud = 0 Balance c GT R I n P T X ±² ² ³ ±´ ´ ´´ ±²²³²²´
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Measurement: Government Debt •N D = N a t i o n a l D e b t = Value of Outstanding Government Bonds •G o v e r n m e n t B o n d ¾ Financial Security or Contract ¾ Government (Borrower) pays Holder (Investor) ± Interest or Coupon Payment per period ± Value of the Bond at Maturity (usually $10K) ¾ Bond sold in Market for whatever Price it will bear ¾ Funds raised used to finance Government Spending
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Government Budget and the National Debt When Re 0 0
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November 16 notes - Deficits and Debt Required Reading...

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