Question

. Nova Scotin's Deb Igithis problem every year Please look up Assignment3 2018. The solutions are posted. It's best that you work on the problem and refer to the solutions if you've difficulties. The primary lesson is that exponential processes are insidious (look up what that means if you do not know) and because they are utterly pervasive it is important to thoroughly understand them k for the paydown rate is zero deficit financing. This is where we set the paydown rate to B dollars/year to a value so that the debt S(t) dollars no longer increases but remains at the initial amount So we *never pay off the debt, but merely pay interest forever If we choose B < B then the debt grows *exponentially*. However, if we slightly increase the paydown rate to B> B then we start to pay off the debt and the debt begins to *decrease exponentially*. The question is ultimately about answering a simple question: 'How many cups of Tim Horton's coffee per taxpayer per week does paying off the debt in a given number of years correspond to, given an interest rate 10% and initial debt is So-10 billion dollars? The answer to this question leads to a surprising and key insight that directly leads to other very sensible questions.

Answer 1

We answer this question by assuming certain variables

No.of tax payers 140 million

Cost of Tim Horton coffee $2.00

No. of weeks per year 52

Debt 10 billion

Interest rate 10%

If we pay pack the debt in 10 years, then annual repayment

Annual repayment $1,627.45 million

No. of Coffee 0.11