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Martin Wolf Understands Economics...

Test Your Knowledge Questions for September 27 Econ 1 Lecture

  1. Since the interest rate on Treasury debt r is less than the economy’s growth rate g, our budgetary situation is fine, except that we want short-term deficits in order to reduce cyclical unemployment—right?
  2. How do you calculate what the long-run debt-to-GDP ratio will be?
  3. Why is it important that a government run or be expected to run a permanent primary surplus?
  4. Even if the national debt is sustainable, why is it good to run a balanced budget—or even a surplus—over the business cycle?
  5. Why don’t governments run balanced budgets over the cycle?
  6. What is James Buchanan’s critique of cyclical deficit spending?
  7. What is the Laffer curve?
  8. Should you ever trust the Wall Street Journal?

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