Answer to Question #51451 in Macroeconomics for oswald
Suppose a country has a national debt of $5,000 billion, a GDP of $10,000 billion, and a budget deficit of $100 billion.
How much will its new national debt be?
Compute its debt-GDP ratio.
Suppose its GDP grows by 1% in the next year and the budget deficit is again $100 billion. Compute its new level of national debt and its new debt-GDP ratio.
Explain your answers for all of these questions (one well composed paragraph for each question).
Its new national debt is 5,000 + 100 = $5,100 billion.
Its debt-GDP ratio is 5,100/10,000*100% = 51%, so the level of debt is affordable for the country (less then 60% of GDP).
If its GDP grows by 1% in the next year and the budget deficit is again $100 billion, the new level of national debt will be 5,100 + 100 = $5,200 and its new debt-GDP ratio will be 5,200/10,100*100% = 51.5%, so the level of debt is still affordable (less then 60%).
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