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ECO - If the fiscal deficit is 7% of GDP, and the public, both domestic and foreign

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Question;1.a) A. If the fiscal deficit is 7% of GDP, and the public, both domestic and foreign,buy new Treasury bonds equal to 5% of GDP, what is the percentage of newTreasury bonds that are sold to the Federal Reserve Bank (our Central Bank)?b) If Treasury debt owed to the public is 73% of GDP, what will be the new ratioof debt to GDP following the financing of the deficit by bond sales by theTreasury? (Hint: note that the sale of US Treasury bonds to the Federal ReserveBank are not ?held by the public.?)c) Discuss the following statement, indicating whether you agree or disagree andargue your case.?If debt grows forever faster than income, there will be a debt default.?

 

Paper#57703 | Written in 18-Jul-2015

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