Suppose in the beginning of 2006, a country has a national debt of $5,000 billion.Its GDP in
2006 is $20,000 billion and its budget surplus of $130 billion.Compute its debt-GDP ratio at the
End of the year.

Question

Quizplus · Accepted Answer

The debt-GDP ratio is calculated by dividing the national debt by the GDP and multiplying by 100.

At the beginning of 2006, the national debt was $5,000 billion and the GDP was $20,000 billion. Therefore, the debt-GDP ratio was:

(5,000/20,000) x 100 = 25%

However, during the year, the government had a budget surplus of $130 billion. This means that the national debt decreased by $130 billion.

At the end of 2006, the national debt was:

$5,000 billion - $130 billion = $4,870 billion

And the GDP remained the same at $20,000 billion.

Therefore, the debt-GDP ratio at the end of 2006 was:

(4,870/20,000) x 100 = 24.4%

Thus, the correct choice is C (24.4%).

Suppose in the Beginning of 2006, a Country Has a National