STABILIZATION AND GOVERNMENT DEFICITS
345
TEST YOURSELF
1.
Distinguish between automatic and discretionary fiscal
policy.
2.
Define the intertemporal budget constraint of the
government. How is it related to the sustainability of the debt?
3.
Why is the level of debt not as suitable a measure as the
debt/GDP ratio of a country’s debt obligations?
4.
What is the difference between the fiscal deficit and the
primary deficit? Which is a more appropriate measure of
the deficit of the government and why?
5.
Define a steady state. When is a steady state stable and
when is it unstable? What condition must be satisfied to
ensure that ...
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