When deficits are run continuously with a constant nominal interest rate,nominal interest payments on the total nominal debt will become smaller relative to future deficits,ceteris paribus.
If nominal interest rates stay constant,then the ratio of new nominal interest payments to new nominal debt is equal to total nominal payments to total nominal debt.

Question

Quizplus · Accepted Answer

If nominal interest rates stay constant, the nominal interest payments on the total nominal debt will remain proportional to the debt, not smaller relative to future deficits. The ratio of interest payments to debt remains constant, not equal to the ratio of new interest payments to new debt.

When Deficits Are Run Continuously with a Constant Nominal Interest