Suppose the federal government cuts taxes and increases spending, raising the budget deficit to 12 percent of

Question:

Suppose the federal government cuts taxes and increases spending, raising the budget deficit to 12 percent of GDP. If nominal GDP is rising 5 percent per year, are such budget deficits sustainable forever? Explain. If budget deficits of this size are maintained for twenty years, what is likely to happen to your taxes and your children’s taxes in the future? Can you personally do something today to offset this future effect?