QUESTION 9 Suppose that a country has no public debt in year 1 but experiences a

Question

QUESTION 9

Suppose that a country has no public debt in year 1 but experiences a budget deficit of $40 billion in year 2, a budget deficit of $20 billion in year 3, a budget surplus of $10 billion in year 4, and a budget deficit of $2 billion in year 5.

Instructions: Enter your answers as whole numbers. For the public debt, enter your answer as a positive number.

a. What is the absolute size of its public debt in year 5?   $____________ billion.

b. If its real GDP in year 5 is $104 billion, what is this country

Explanation / Answer

a)  The absolute size of its public debt in year 5 = 52 billion.

b) Public debt as a percentage of real GDP in year 5 = 52/ 104 X 100 = 50%

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