In both the Keynesian and classical economic systems, the economy is always tending towards _____.

At the beginning of year one, there is no government debt outstanding. The government runs a $100 billion deficit in year one. Interest at a nominal rate of 10% must be paid starting in year two

Assume nominal GDP in year one is $2000 billion and the nominal growth rate of GDP is 4%. Assume the government balances its primary budget in the future and the interest rate and growth rate do not change. (a) What will be the government deficit in years two, three, four, and five? (b) What will be the value of government bonds outstanding at the end of the fifth year? (c) What will be the debt—GDP ratio at the end of year five?

If the government owns a nationalized firm, the prices are

a. set by an administrative agency of the government b. set by the free market c. high enough to make economic profits for the government d. determined by competition e. set to encourage efficiency and reduce waste