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Outline
1. How is the GDP measured? 2. Understanding inflation rate 3. Relationship between Inflation rate and
1. 2. 3. 4. Interest rates Savings Investment Employment
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4. Budget Deficit
Budget Deficit: Government Budget = summarized version of : Anticipated revenues and Anticipated expenses of a government (formulated by the executive and passed by the legislature as a legal document) Government Budget: focus on distribution of wealth for economic political and social purposes
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4. Budget Deficit
Budget Deficit: Public expenditures > public revenues Must be financed by loans Public Debt increases Interest rates on government bonds increase Depending on types of expenditures: Employment might increase Private investment might be crowded out
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5. Government Debt
Overall government debt = accumulated debts Problem: even if no new debts, overall debt is rising because of interest rates on already existing debts Government debt should be seen in relation to growth rate If growth rate is higher than real interest rate => not a big problem
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