Chapter 5: Public Deficit & Public Debt

Question 1

Public Budget

Answer 1

The public budget is a list of all public expenditures and public
incomes. It is the result of political negotiations and is approvedby the parliament.

Question 2

Public Debt

Answer 2

The public debt is the accumulation of all not-yet-repaid loans
needed to finance all past & present deficits.

Question 3

Debt-Stabilizing Primary Balance

Answer 3

The debt-stabilizing primary balance, denoted Zt^* (=is a theoretical threshold for the actual primary balance Zt), is the primary balance required to keep the debt constant

Question 4

free rider problem

Question 5

the difference between primary and budged balance

Answer 5

• The primary balance is an indicator of the current fiscal policy
• The budget balance is an indicator of the current & past fiscal
  policies