The Effects of Federal Government Deficits and Debt

<p>1. INTRODUCTION 1<br>2. THEORY 3<br>11 CLASSICAL MODEL 3<br>2.2 SOURCES AND USES OF DISPOSABLE INCOME 5<br>13 INVESTMENT 6<br>14 EFFECTS OF A GOVERNMENT DEFICIT 8<br>15 INTEREST RATES AND INFLATION 9<br>16 THE RICARDIAN EQUIVALENCE THEOREM 10<br>3. EMPIRICAL INVESTIGATION 13<br>3.1 DESCRIPTION OF ROBERT BARRO'S CONSUMPTION MODEL 13<br>3.2 SOURCES OF DATA 16<br>3.3 REGRESSION RESULTS OF BARRO AND OF PRESENT STUDY 23<br>3.4 EFFECTS OF DEFICIT ON REGRESSION VARIABLES 25<br>3.5 ADDITION OF THE STOCK OF OUTSTANDING GOVERNMENT DEBT 27<br>3.6 INCLUSION OF FEDERAL AND NONFEDERAL DEFICITS AND DEBT 33<br>4. CONCLUSIONS 36<br>references 37</p>