Given that nothing else is borrowed in the near future, the length of time it will take a government to completely eliminate its stock of debt will be entirely dependent on how much more annual repayments exceed the annual interest expenses. The interest expense portion of the debt is a function of the present stock of debt, y, and is given by i(y) %3D у — у? The amount of money that the government repays to reduce its debt stock is assumed to be a fraction, a, of the present stock of debt. Repayment is done at the end of each financial vear

Given that nothing else is borrowed in the near future, the length of time it will take a government to completely eliminate its stock of debt will be entirely dependent on how much more annual repayments exceed the annual interest expenses. The interest expense portion of the debt is a function of the present stock of debt, y, and is given by i(y) %3D у — у? The amount of money that the government repays to reduce its debt stock is assumed to be a fraction, a, of the present stock of debt. Repayment is done at the end of each financial vear

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.5P

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