KEY EQUATIONS

∆B = nominal government budget deficit (15.3)

The change in the nominal value of the government debt equals the nominal government budget deficit.

The government budget deficit equals the increase in the stock of government debt outstanding, B, which in turn equals the sum of additional holdings of government debt by the public, B^p, and by the central bank, B^cb.

In an all-currency economy, real seignorage revenue, R, equals the increase in the money supply, ∆M, divided by the price level, P. This ratio in turn equals the inflation rate (the tax rate on money) multiplied by the real money supply (the tax base).

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