paying off a huge national debt with higher taxes is an abomination x 2
Paying off a huge national debt with higher taxes is an abomination x 2. Assume that the national debt is 100 monetary units of money, and the interest rate on the national debt is 10 percent. Assume that the money supply is 300 units. Assume that taxes that have been collected are 200 units. Assume that velocity is 5 and that aggregate demand is the product of money supply times velocity. Assume that the government then borrows another 50 monetary units. How does it try to pay off the debt plus interest? Initial Scenario National Debt : 100 monetary units Interest Rate : 10% Money Supply : 300 units Taxes Collected : 200 units Velocity of Money : 5 Aggregate Demand : Money Supply * Velocity = 300 * 5 = 1500 units Additional Borrowing New Borrowing : 50 monetary units Total Debt : 100 + 50 = 150 monetary units Interest Calculation Initial Interest on Debt : 100 * 10% = 10 units Interest on New Total Debt : 150 * 10% = 15 units Payment Options The government has three main sources t