Greece, Ireland, Portugal, and Spain all went through national budget difficulti
ID: 1142223 • Letter: G
Question
Greece, Ireland, Portugal, and Spain all went through national budget difficulties in recent years. Use the data below to answer questions regarding the sovereign debts of these nationals (All data comes from the OECD and is in billions of current US dollars.).
2000 2010
Debt GDP Debt GDP
Greece $138 $127 $488 $308
Ireland $34 $98 $104 $206
Portugal $62 $118 $190 $231
Spain $292 $586 $700 $1,420
a. Compute the debt-to-GDP ratio for all four nations in both 2000 and 2010.
b. Compute the average yearly budget deficit for each of the nations over this period.
c. In your judgment, which of the four nations was in the worse fiscal shape in 2010? Use your computations from above to justify your answer.
Explanation / Answer
a.
2000
2010
Nation
Debt
GDP
Debt
GDP
Debt to GDP-2000
Debt to GDP-2010
Greece
138
127
488
308
1.09
1.58
Ireland
34
98
104
206
0.35
0.50
Portugal
62
118
190
231
0.53
0.82
Spain
292
586
700
1,420
0.50
0.49
Debt to GDP is calculated using the formula = Debt/GDP
b. Average yearly deficit for Greece = (488-138)/10 = 35
Average yearly deficit for Ireland = (104-34)/10 = 7
Average yearly deficit for Portugal = (190-62)/10 = 12.8
Average yearly deficit for Spain = (700-292)/10 = 40.8
2000
2010
Nation
Debt
GDP
Debt
GDP
Average annual deficit
Greece
138
127
488
308
35
Ireland
34
98
104
206
7
Portugal
62
118
190
231
12.8
Spain
292
586
700
1,420
40.8
c. Looking at the debt to GDP ratio and average yearly deficit, Greece is in worse fiscal shape as its respective value for both parameters is high when compared with other nations.
2000
2010
Nation
Debt
GDP
Debt
GDP
Debt to GDP-2000
Debt to GDP-2010
Greece
138
127
488
308
1.09
1.58
Ireland
34
98
104
206
0.35
0.50
Portugal
62
118
190
231
0.53
0.82
Spain
292
586
700
1,420
0.50
0.49
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