宏观经济学课件(英文版)14.pptVIP

May 19, 2003 73-347 Game Theory--Lecture 1 May 19, 2003 Lecture 1  Chapter 14 The Public Debt  In recent years, one of the most controversial economic issues has been the government’s budget deficit. At least from reading the newspapers, we would think that the economy suffers greatly when the government runs a deficit. As we shall see, our conclusions depart dramatically from those expressed in the newspapers. The Public Debt Budget deficits arise when the government finances part of its expenditures by issuing interest-bearing government bonds—public debt—rather than levying taxes. A budget deficit means that the quantity of public debt increases over time. The History of the Public Debt in the United States and the United Kingdom The History of the Public Debt in the United States and the United Kingdom The History of the Public Debt in the United States and the United Kingdom Characteristics of Government Bonds In the model, the government can now borrow funds from households by issuing interest-bearing bonds. We assume that these government bonds pay interest and principal in the same way as the private bonds in the model. In particular, we continue to simplify by assuming that all bonds have very short maturity. Characteristics of Government Bonds We also assume that, like private bonds, government bonds specify nominal amounts of principal and interest. That is, we do not consider indexed bonds, which we discussed in chapter 11. Characteristics of Government Bonds We assume that bondholders (households in our model) regard government bonds as equivalent to private bonds. Specifically, we do not allow for the possibility that private bonds are riskier than government bonds in terms of the probability of default. In this case, households would hold the two kinds of bonds only if they paid the same nominal interest rate, i. Characteristics of Government Bonds Characteristics of Government Bonds Budget Constraints and Budget Deficits The Government’s