文档介绍：Intermediate Macroeconomics
Lecture 12
1
Government Debt
Scale of govern. debt
Is budget deficit correctly measured?
Traditional view of govern. Debt
Ricardian equivalence
Other possible effects of govern. debt
2
Scale of Govern. Debt
OECD Economic Outlook 72 (Dec. 2002)
3
Is Budget Deficit correctly measured?
Inflation
Real govern. debt stays the same
(100 apple,$1 each)
price rises 50%
Nominal govern. debt es $150
$50 deficit
Current method tends to overstate deficit when there is inflation
4
Is Budget Deficit correctly measured?
Capital Assets
Government’s assets and liabilities should be considered (capital budgeting)
budget deficit = change in liabilities - change in assets
Hard to decide which expenditures should count as capital expenditures…
5
Is Budget Deficit correctly measured?
Uncounted liabilities
Current measure excludes some important govern. liabilities
. pensions of govern. workers
social security system
contingent liability
6
Is Budget Deficit correctly measured?
Business cycle
Recession:
Tax e decreases
Transfer increases
Budget deficit increases
Change in budget deficit depends not only on govern. policies, but also on business cycle
7
The Traditional View of Govern. Debt
Short-run
Y
E
Y
r
E=C(Y-T)+I+G
Y=E
LM
IS
8
The Traditional View of Govern. Debt
Tax cut
Consumption increases
Output increases
9
The Traditional View of Govern. Debt
Long-run
I,S
r
k
y
I
S=Y-C(Y-T)-G
i=sf(k)
10