Explanation:
Interest on public debt is a transfer payment and is not included in national income as it does not correspond to any current production of goods or services.
Explanation:
In a liquidity trap, interest rates are near zero and the demand for money becomes perfectly elastic; additional money supply is absorbed as idle balances without reducing interest rates further.
Explanation:
Ricardian equivalence asserts that, under certain conditions, debt-financed tax cuts do not stimulate consumption because forward-looking agents save the tax cut to pay the future taxes needed to service the debt.
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