Chapter 16: Problem 52

If a government runs a budget deficit of $\$ 10$ billion dollars each year for ten years, then a surplus of $\$ 1$ billion for five years, and then a balanced budget for another ten years, what is the government debt?

Short Answer

Expert verified

The government's net debt after going through the three phases is \$95 billion.

Step by step solution

Calculate total deficit from the first phase

To calculate the total deficit during the first phase, we will multiply the annual deficit amount (\$10 billion) by the number of years in this phase (10 years): \[Total\_Deficit = Annual\_Deficit \times Number\_of\_Years\]

Calculate total surplus from the second phase

To calculate the total surplus during the second phase, we will multiply the annual surplus amount (\$1 billion) by the number of years in this phase (5 years): \[Total\_Surplus = Annual\_Surplus \times Number\_of\_Years\]

Calculate net debt by taking the difference between the deficit and surplus amounts

Subtract the total surplus from the total deficit to find the net government debt: \[Net\_Debt = Total\_Deficit - Total\_Surplus\]

Simplify and solve the equations

Using the equations from steps 1-3, let's calculate the values for the total deficit, total surplus, and net government debt: Total Deficit: \[Total\_Deficit = \$10 \ billion/year \times 10 \ years = \$100 \ billion\] Total Surplus: \[Total\_Surplus = \$1 \ billion/year \times 5 \ years = \$5 \ billion\] Net Debt: \[Net\_Debt = \$100 \ billion - \$5 \ billion = \$95 \ billion\] After going through the three phases, the government's net debt is \$95 billion.

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If a government runs a budget deficit of \(\$ 10\) billion dollars each year for ten years, then a surplus of \(\$ 1\) billion for five years, and then a balanced budget for another ten years, what is the government debt?

Short Answer

Step by step solution

Calculate total deficit from the first phase

Calculate total surplus from the second phase

Calculate net debt by taking the difference between the deficit and surplus amounts

Simplify and solve the equations

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