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Suppose the initial quantity of government bonds is 2,000 goods and initial aggregate income is 40,000 goods. The economy grows at 1 percent per...
Suppose the initial quantity of government bonds is 2,000 goods and initial aggregate income is 40,000 goods. The economy grows at 1 percent per year. Let the tax rate on income be 20 percent. If the real interest rate on government bonds is 5 percent, how many periods will it take before the economy can no longer afford to buy government bonds? (Assume the maximum quantity of bonds occurs at the point where principal and interest on the bonds is equal to aggregate income.)