Due Sunday 12.03.17 at 11:45 PM Attempts: Average: /4 6. Computing the national

Question

Due Sunday 12.03.17 at 11:45 PM Attempts: Average: /4 6. Computing the national debt from government data Consider Eastern Krakatowa, a fictional nation with no budget deficit or surplus when the government declared its independence in 2010. The following question will help you understand the difference between stocks and flows, using the budget deficit and national debt as an example. The following table displays government outlays and tax revenues for the first four years of Eastern Krakatowa's existence. For each year, select the correct answer from the dropdown menu to indicate whether the government was experiencing a budget deficit or a budget surplus. Then, enter the dollar amount of the deficit or surplus (in absolute value). In other words, if the government was running a deficit of $5.2 million, enter "5.2" in the Deficit or Surplus Amount column. Finally, compute the national debt at the end of each of the years listed, and enter that amount in the last column. Government Outlays (Millions of dollars) $10.6 $11.3 $12.1 $14.2 Tax Revenue (Millions of dollars) $9.5 $11.6 $12.2 $13.5 Deficit or Surplus Amount (Millions of dollars) National Debt (Millions of dollars) Deficit or Surplus Year 2010 2011 2012 2013 QNA 3.16 © 2004-2016 Aplia. All rights reserved.

Explanation / Answer

Concerns about national debt.

Statements 2 and 3 apply.

If the debt is very high, the country will go into default.

The debt ratio was the highest in 2011 (95%), than in the previous years.

Year Government outlays (millions of dollars) Tax revenues (millions of dollars) Deficit or surplus Deficit or surplus (millions of dollars) National Debt (millions of dollars) 2010 10.6 9.5 Deficit -1.1 1.1 2011 11.3 11.6 Surplus 0.3 1.4 2012 12.1 12.2 Surplus 0.1 1.5 2013 14.2 13.5 Deficit -0.7 2.2 Budget deficit is the difference between tax revenues and spending. National debt is the accumulation of budget deficit.

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