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An Economy Has a Government Debt of $6 Trillion,its GDP

Question 145

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An economy has a government debt of $6 trillion,its GDP is $10 trillion,and it has a 3% growth rate.
(a)What is its debt-to-GDP ratio?
(b)What size government budget deficit could this economy have without increasing the debt to GDP ratio?

Correct Answer:

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(a)Debt/GDP = 6/10 = 0.6 or 60%.
(b)The ...

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