This question uses the UK Office for Budget Responsibility's (OBR's) 2011 Fiscal Sustainability Report (July 2011). The
Question:
This question uses the UK Office for Budget Responsibility's (OBR's) 2011 Fiscal Sustainability Report (July 2011). The report can be downloaded from the publications section of the OBR website:
(http://budgetresponsibility.independent.gov.uk/category/publications/).
Table 5.1 (on page 112) shows the adjustment to the primary balance needed to ensure the long-term sustainability of the public finances. How do each of the following factors affect the extent of adjustment (i.e. tightening) required to reach the target debt to GDP ratio by 2060? In each case, you must give an explanation of how you think the factor influences the debt dynamics equation (14.9).
(a) interest rates
(b) productivity
(c) migration
(d) age structure
(e) increased health spending
(f) lower morbidity rates.
Step by Step Answer:
Macroeconomics Institutions Instability And The Financial System
ISBN: 9780199655793
1st Edition
Authors: Wendy Carlin, David Soskice