1. Why does a reduction in aggregate demand reduce real output in the Keyen’s model, rather than the price level? Why might a full-strength multiplier apply to a decrease in aggregate supply?
2. Why might economists be quite concerned if the annual interest payments on the debt sharply increased as a percentage of the GDP?
3- Trace the cause-and-effect chain through which financing and refinancing of the public debt might affect real interest rates, private investment, the stock of capital, and economic growth. How might investment in public capital and complementarities between public and private capital alter the outcome of the cause-effect chain?