ECON 105 Lecture Notes - Lecture 7: Ricardian Equivalence, Marc Emery
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Immediate effect of changing go is uncertain (on pbd) Immediate effect of changing t is uncertain (on pbd) Austerity: keeping g and tp low which has uncertain effects on pbd. Pbd = g tr + tp = go - ty. Bd = pbd + id when d = public debt. = g tr tp + id. Gov"t borrows the amount not covered by its total revenue. If bd is positive and it rises (from 20 to 30) then debt rises more (from 800 to 830 instead to. If bd is negative and it rises and is still negative (from -30 to -20) then debt falls less (from 800 to. If bd then there is upward pressure on debt. If bd is positive and it falls and is still positive (from 30 to 20) then debt rises less (from 800 to.