8. Computing the national debt from government data Aa Aa Consider Eastern Kraka

Question

8. Computing the national debt from government data Aa Aa 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 ar example The following table displays government spending 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 Spending (Millions of dollars) $10.4 $11.6 $12.5 $14.6 Tax Revenue (Millions of dollars) $9.3 $11.9 $12.3 $14.3 Deficit or Surplus Amount (Millions of dollars) National Debt Deficit or Surplus Year 2010 2011 2012 2013 (Millions of dollars)

Explanation / Answer

When government spending exceeds tax revenue, there tends to be budget deficit.

When government spending is less than tax revenue, there tends to be budget surplus.

Following is the complete table -

Government

spending

Tax

revenue

Deficit or

surplus

Deficit or surplus

amount

National

debt

Year

Government

spending

Tax

revenue

Deficit or

surplus

Deficit or surplus

amount

National

debt

2010 10.4 9.3 Deficit 1.1 1.1 2011 11.6 11.9 Surplus 0.3 0.8 2012 12.5 12.3 Deficit 0.2 1.0 2013 14.6 14.3 Deficit 0.3 1.3

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