Answer the next question using the following budget information for a hypothetic

Question

Answer the next question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt Government Spending Tax Revenues Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $450 500 600 640 680 600 $425 450 500 620 580 620 GDP 2,000 3,000 4,000 5,000 4,800 5,000 If year 1 is the first year of this nation's existence and year 6 is the present year, this nation's public debt is Multiple Choice $275 billion. $100 billion. $230 billion. $3,540 bilion.

Explanation / Answer

Answer: 275 billion

Debt = Government Spending - Tax Revenue

Year 1 = 450 - 425 = 25

Year 2 = 500 - 450 = 50

Year 3 = 600 - 500 = 100

Year 4 = 640 - 620 = 20

Year 5 = 680 - 580 = 100

Year 6 = 600 - 620 = -20

The Total is 275 billion.

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