Abstract
So far we started from the premise that government purchases and the tax rate are given exogenously. In this situation, the government budget constraint equals B = G + rD − t(Y + rD). And the budget deficit adds to public debt \(\dot{D}\) = B. Now, as an exception, we shall posit that the government continuously adjusts public consumption so as to always balance the budget. Under these circumstances, the government budget constraint simplifies to G = tY. As a corollary, the budget balances B = 0, and there will be no public debt D = 0.
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© 1992 Physica-Verlag Heidelberg
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Carlberg, M. (1992). Continuous Budget Balance. In: Monetary and Fiscal Dynamics. Studies in Contemporary Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-47689-1_22
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DOI: https://doi.org/10.1007/978-3-642-47689-1_22
Publisher Name: Physica-Verlag HD
Print ISBN: 978-3-7908-0619-9
Online ISBN: 978-3-642-47689-1
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