What is government intertemporal budget constraint?
The intertemporal budget constraint says that if a government has some existing debt, it must run surpluses in the future so that it can ultimately pay off that debt. Specifically, it is the requirement that. current debt outstanding = discounted present value of future primary surpluses.
How do you do intertemporal budget constraints?
In words, the intertemporal budget constraint (“intertemporal” = “across time”) says that the present discounted value of consumption expenditures must equal the present discounted value of income. 0 , so you can use L’Hopital’s rule to find the limit, which works out to the natural log.
What is budget constraint simple definition?
The budget constraint is the boundary of the opportunity set—all possible combinations of consumption that someone can afford given the prices of goods and the individual’s income. Opportunity cost measures cost in terms of what must be given up in exchange.
What is the meaning of intertemporal?
intertemporal (not comparable) Describing any relationship between past, present and future events or conditions.
What is meant by government budget constraint?
The government budget constraint is an accounting identity linking the monetary authority’s choices of money growth or nominal interest rate and the fiscal authority’s choices of spending, taxation, and borrowing at a point in time.
What is the government budget constraint equation?
government budget constraint. • government budget deficit = spending – revenue. • spending = primary spending + interest payments. • revenue = taxation – transfer payments = net taxation. • deficit = primary deficit + interest payments.
What is the government budget constraint?
What is the slope of the intertemporal budget constraint?
The indifference curve that crosses point B is tangent to the intertemporal budget constraint, whose slope is −(1 + r1 ).
What is budget constraint equation?
The Budget Constraint Formula PB = price of item B, while QB = quantity of item B consumed. Maria knows that her income to spend is $500, and what concerts and pizzas cost.
What is budget constraint explain with diagram?
A budget line is defined as the purchasable combinations of two goods, given the prices of each good and consumer’s income. Thus the budget constraint describes the different amount of two commodities that a consumer can afford.
What is intertemporal risk?
Intertemporal choice refers to decisions, such as spending habits, made in the near-term that can affect future financial opportunities. Theoretically, by not consuming today, consumption levels could increase significantly in the future, and vice versa.
What is intertemporal trade in economics?
In the intertemporal trade model, you have two countries in two time periods. Assume they may be trading goods and services, but initially suppose that they are autarkic in savings, so that each country must use domestic savings to finance their investment.