Calculate the real deficit or surplus in the following cases: a. Inflation is 11

Question

Calculate the real deficit or surplus in the following cases:
  
a. Inflation is 11 percent. Debt is $1 trillion. Nominal deficit is $90 billion.
  
    Instructions: Round your answer to the nearest whole dollar amount.
   
    $____ billion (deficit or surplus).
  
b. Inflation is 11 percent. Debt is $1 trillion. Nominal deficit is $150 billion.
  
    Instructions: Round your answer to the nearest whole dollar amount.
   
    $___ billion (surplus or deficit).

c. Inflation is -5 percent. (Price levels are falling.) Debt is $300 billion. Nominal deficit is $40 billion.
  
    Instructions: Round your answer to the nearest whole dollar amount.
   
    $_____ billion (deficit or surplus).

d. Inflation is 1 percent. Debt is $3 trillion. Nominal surplus is $50 billion.
  
    Instructions: Round your answer to the nearest whole dollar amount.
  
    $___ billion (surplus or deficit)

Explanation / Answer

Note:

Real Deficit =Nominal Deficit-(Inflation*Total Debt) Inflation 11% Debt 1000 Nominal Deficit (surplus) 90 Real Deficit (surplus)=90-(1000*0.11) -20 surplus $20 billions Inflation 11% Debt 1000 Nominal Deficit (surplus) 150 Real Deficit (surplus)=150-(1000*0.11) 40 deficit $40 billions Inflation -5% Debt 300 Nominal Deficit (surplus) 40 Real Deficit (surplus)=40-(300*-0.05) 55 deficit $55 billions Inflation 1% Debt 3000 Nominal Deficit -50 Real Deficit (surplus)=-50-(3000*0.01) -80 surplus $ 80 billions

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