question archive Suppose that a country has no public debt in year 1, and 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
Suppose that a country has no public debt in year 1, and 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
Subject:EconomicsPrice:2.88 Bought3
Suppose that a country has no public debt in year 1, and 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. Enter your answers as whole numbers. For the absolute size of its public debt, enter your answer as a positive number. What is the absolute size of its public debt in year 4?
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
In each period, a budget surplus will reduce the amount of debt, while a budget deficit will increase the amount of debt. Starting with no debt in year 1, given a deficit of $40 billion in year 2, the debt will increase to $40 billion in year 2. Given budget surplus of 10 billion in year 3 and a 2 billion deficit in year 4, the total size of public debt in year 4 will be:
- 40 - 10 + 2 = 32 billion
