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26 October, 13:13

Suppose that a country has no public debt in year 1 but experiences a budget deficit of $40 billion in year 2, a budget surplus of $10 billion in year 3, and a budget deficit of $2 billion in year 4. Instructions: Enter your answers as whole numbers. For the absolute size of its public debt, enter your answer as a positive number. a. What is the absolute size of its public debt in year 4? b. If its real GDP in year 4 is $104 billion, what is this country's public debt as a percentage of real GDP in year 4?

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  1. 26 October, 16:40
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    a. $32 billion

    b. 30.77%

    Explanation:

    a. The absolute size of its public debt in year 4 is shown below:

    = Budget deficit in year 2 - budget surplus in year 3 + budget deficit in year 4

    = $40 billion - $10 billion + 2 billion

    = $32 billion

    b, And, public debt as a percentage of real GDP in year 4 is

    = Public debt : Real GDP in year 4

    = $32 billion : $104 billion

    = 30.77%

    We simply applied the above formula so that the both answers could come
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