The table below shows government purchases (G),net tax revenues (T),and debt-service payments (iD)over a 4-year period for a hypothetical economy.All figures are in billions of dollars.Assume the stock of debt at the end of 2015 is $500 billion. TABLE 31-1 Refer to Table 31-1.What is the stock of debt at the end of 2016?

Question

The table below shows government purchases (G),net tax revenues (T),and debt-service payments (iD)over a 4-year period for a hypothetical economy.All figures are in billions of dollars.Assume the stock of debt at the end of 2015 is $500 billion.  TABLE 31-1 Refer to Table 31-1.What is the stock of debt at the end of 2016?

Quizplus · Accepted Answer

The formula for the stock of debt is:
Debt(end of year) = Debt(end of previous year) + (G - T) - iD
Using this formula, we can find the stock of debt at the end of each year:
2015: $500 billion (given)
2016: $500 billion + ($1,150 billion - $1,210 billion) - $60 billion = $500 billion - $120 billion = $380 billion
2017: $380 billion + ($1,250 billion - $1,190 billion) - $70 billion = $380 billion - $10 billion = $370 billion
2018: $370 billion + ($1,350 billion - $1,280 billion) - $80 billion = $370 billion = $330 billion
Therefore, the stock of debt at the end of 2016 is $380 billion, which is answer choice D.

The Table Below Shows Government Purchases (G),net Tax Revenues (T),and