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please answer in the given format. thank u 1% 100 1% 5. (0.2 marks) The slides make the claim that it is possible for the
please answer in the given format. thank u
1% 100 1% 5. (0.2 marks) The slides make the claim that it is possible for the Debt-to-GDP ratio to be stable, even if a country has zero real growth along with a positive deficit. First, consider that, in general, the nominal value of the debt evolves: D-1 = [-(T- TR-) +10D]+D: i.e., the debt in the next period equals the current-period debt, D, plus the current-period deficit, [-(T,- TR - G) + TD] where i% is the percentage interest rate that must be paid on D. To examine the plausibility of the claim, suppose the primary deficit" (the part of the deficit that excludes interest payments) is 1% of the level of the existing debt, so that -(T- TR - Gi) = (0.01)D and D > 0. Real GDP is not growing, but there is 2% inflation rate so that nominal GDP is growing. Finally use the interest rate i% you found in question 4 in answering this question. Does the economy satisfy the condition required for a stable Debt-to-GDP ratio? Show your calculations. Hint: %AD - DO DE x100% for all t, in this problem. 1% 5. Given:%AP,= 2%, D:+1 = [-(T - TR-G) + 1%D:]+D, : -(1,- TR. - G) =(0.01)D, and D. > 0; Hint: %AD, DE+1-De x100% Find: Is the Debt-to-GDP ratio stable? DE 1% 100 1% 5. (0.2 marks) The slides make the claim that it is possible for the Debt-to-GDP ratio to be stable, even if a country has zero real growth along with a positive deficit. First, consider that, in general, the nominal value of the debt evolves: D-1 = [-(T- TR-) +10D]+D: i.e., the debt in the next period equals the current-period debt, D, plus the current-period deficit, [-(T,- TR - G) + TD] where i% is the percentage interest rate that must be paid on D. To examine the plausibility of the claim, suppose the primary deficit" (the part of the deficit that excludes interest payments) is 1% of the level of the existing debt, so that -(T- TR - Gi) = (0.01)D and D > 0. Real GDP is not growing, but there is 2% inflation rate so that nominal GDP is growing. Finally use the interest rate i% you found in question 4 in answering this question. Does the economy satisfy the condition required for a stable Debt-to-GDP ratio? Show your calculations. Hint: %AD - DO DE x100% for all t, in this problem. 1% 5. Given:%AP,= 2%, D:+1 = [-(T - TR-G) + 1%D:]+D, : -(1,- TR. - G) =(0.01)D, and D. > 0; Hint: %AD, DE+1-De x100% Find: Is the Debt-to-GDP ratio stable? DE Step by Step Solution
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