Given that nothing else is borrowed in the near future, the length of time it will takea government to completely eliminate its stock of debt will be entirely dependent onhow much more annual repayments exceed the annual interest expenses. Theinterest expense portion of the debt is a function of the present stock of debt, y, andis given byi(y) = y – y?The amount of money that the government repays to reduce its debt stock isassumed to be a fraction, a, of the present stock of debt. Repayment is done at theend of each financial year.(i)(ii)Solve for the present stock of debt, y, as a function of t.What will happen to government debt ast → o? Justify your response.

Government expenditure is the expenditure that is incurred on the infrastructure, roads, railways,…

Given that nothing else is borrowed in the near future, the length of time it will take a government to completely eliminate its stock of debt will be entirely dependent on how much more annual repayments exceed the annual interest expenses. The nterest expense portion of the debt is a function of the present stock of debt, y, and s given by i(y) = y – y? The amount of money that the government repays to reduce its debt stock is assumed to be a fraction, a, of the present stock of debt. Repayment is done at the end of each financial year. Solve for the present stock of debt, y, as a function of t. i) What will happen to government debt as t → o? Justify your response. ii)

Given that nothing else is borrowed in the near future, the length of time it will take a government to completely eliminate its stock of debt will be entirely dependent on how much more annual repayments exceed the annual interest expenses. The nterest expense portion of the debt is a function of the present stock of debt, y, and s given by i(y) = y – y? The amount of money that the government repays to reduce its debt stock is assumed to be a fraction, a, of the present stock of debt. Repayment is done at the end of each financial year. Solve for the present stock of debt, y, as a function of t. i) What will happen to government debt as t → o? Justify your response. ii)

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

Problem 6PA

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