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| Teaching Since: | May 2017 |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Unlike households, governments are often able to sus-tain large debts. For example, in 2013, the U.S. govern-ment’s total debt reached $17.3 trillion, approximatelyequal to 101.6% of GDP. At the time, according to the
U.S. Treasury, the average interest rate paid by the
government on its debt was 2.0%. However, running
budget deficits becomes hard when very large debts are
outstanding.
a. Calculate the dollar cost of the annual interest on
the government’s total debt assuming the interest
rate and debt figures cited above.
b. If the government operates on a balanced budget
before interest payments are taken into account, at
what rate must GDP grow in order for the debt–GDP
ratio to remain unchanged?
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