Class - Mar. 31, 2026

Short-Run Policy

• Stabilizes the economy

Debt-to-GDP Ratio

• Canadian debt-to-GDP ratio is about 40%
• Definitions:
  • d = debt-to-GDP ratio (%)
  • x = primary budget deficit (%)
  • r = interest rate on debt (%)
  • g = growth rate of GDP (%)
• Change in debt-to-GDP ratio:
  • = x + (r - g)*d