ECON1132 Study Guide - Final Guide: Aggregate Demand, Longrun, Irrational Exuberance
Document Summary
Lecture 18 deficits, debt, debt ratio, debt trap. Deficit the excess of expenditures over taxation in any period. Public debt the accumulated total of past deficits minus surpluses, or the total debt outstanding. Debt ratio the ratio of debt to gdp. *if gdp is growing, the debt ratio will fall. If the denominator grows faster than the numerator, the ratio will fall. % r = % d - % gdp. Over the past 6 years in the us, the debt ratio has more than doubled. If large debts persist, we could get stuck in the debt trap. Debt trap when investors doubt the ability of a nation to repay its debt and see securities as risky. They"ll only buy securities if offered higher interest rates, but these higher interest rate only increase the country"s deficits. Deficit = d = id + pbd = id + p(gdp)
