preview

Sargent and Kotlikoff Essay

Better Essays

What is a dynamic game?
In simple word, a dynamic game is where every player gives their best effort to win the game, upon the condition that they follow certain rules and regulations. Although it sounds like in a dynamic game no one knows which team will win, people will see that some of the players missed a few opportunities to score. The main problem with that is when one is inside the game as a player, he or she does not have the outside view and I think having that outside view is very important in real terms, which we call strategy, planning, wisdom, or experience. Therefore, a dynamic game is where each player, both individually and as a team, uses planned strategies and plays with their best efforts to win the game. If we use …show more content…

The strategies each groups are following are very different ones; the monetary authority is following the money circulation, stabilizing the business cycle, reducing the problem with unemployment and inflation. Fiscal authority’s strategy is to make sure that we do not run into a huge budget deficit, our expenditures stays under control, taxes are collected, and make sure everyone is contributing to the system fairly. On the other hand, the public is looking for better jobs, lesser taxes, and more benefits from the government, such as health, retirement, free schools and housings.
When are government budgets inflationary? (Again, think in terms of a game.)
Most of the government’s spending ends up financed by the taxes, which is not inflationary at all. When government finances its spending through bond sales, either to its citizens or companies, it can create either expansionary or inflationary situations depending on how they balance their budget.
It is expansionary when the government spending gets financed through bond selling to the banks will increase the banks’ net worth and money supply, thus it is expansionary. The banks may turn around and use its money to buy the bonds which could have been used for other investment. This type of one time deal really does not have any major impact on the economy. Now if the government spending gets financed by bond sales to the Federal Reserve, and the Federal Reserve is buying

Get Access