Answer Happy

Answer all parts (a)-(c) of this question.
(a) Using a diagram to illustrate your answer
explain why the debt to GDP ratio in an economy may explode over
time when the real interest rate is higher than the growth rate of
real GDP. Explain what a government can do in such a case to keep
under control the debt to GDP ratio.
(b) Outline the main differences between the
traditional and the Ricardian Equivalence view of government
deficits. What are the main assumptions behind the Ricardian
Equivalence view?
(c) Explain why the assumptions behind Ricardian
Equivalence may not hold in reality.