ECON 203 Lecture Notes - Lecture 3: Federal Open Market Committee, Pet Banks, Money Multiplier
Document Summary
Budget deficit- when a government spends more than it has. Budget surplus- when a government saves more than it spends. Us national debt- . 1 trillion ,000 per american. Intergovernmental holdings- . 1 trillion (basically the gov borrowing $ from itself) - social. Current debt to gdp ratio 107% (only japan, italy, and greece have higher ratios than us) Higher debt levels higher interest rates hurts borrowers and hurts investment; makes it harder to pay back debt; may lead to higher taxes on future generations. Debt owed to foreigners- interest payments go outside the country (which is why japan"s debt isn"t bad ) It is okay if we borrow money, we just have to make sure it is productive borrowing (gdp grows faster than debt) Outlaw budget deficits and fiscal policy- would have to cut government spending when revenue falls (only form to fix things) Requires that government spending doesn"t exceed tax revenues.
