An Overview of Fiscal and Public Debt Dynamics

Impacts of fiscal policies (additional deficit) on inflation ■ Key questions: ✓ How are the additional fiscal deficit linked to public/private demands immediately? Additional fiscal deficits (larger spending/ less taxes) Larger private saving Mitigating private debt increases Inflation of import prices Depreciation of currency Worsened external balance Larger private/ public spending Larger imports Inflation of domestic price and wage How large is the fiscal multiplier? 12

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