Question: When Bush || took office in 2001 the U.S. had a surplus of 5.2 trillion dollars. Now we are running a deficit of 13 trillion.


When Bush || took office in 2001 the U.S. had a surplus of 5.2 trillion dollars. Now we are running a deficit of 13 trillion. If in a particular year, say, 2010, the government issued a bond of S 900 billion dollars with an annual rate of 3%, and tax revenue for the year was $400 billion. Ifthe government expenditure (3, for the year was $2 trillion: (i) Write down the government budget constraint and calculate the deficit at the end of the fiscal year 2010. (ii) If the change in bond supply is zero, how much money supply is needed to balance the deficit
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