Question

Lecture 10 Suppose the fictitious country of Islandia begins fiscal year 1 with no public debt. The tax revenues and government expenditures for the next five years are shown in the table below. Instructions: In parts a and b, enter your answers as whole numbers. In part c, round your answer to 1 decimal place. Enter a positive number for a surplus and a negative number for a deficit (debt). Tax Revenues. Expenditures, a. Calculate the deficit or surplus for each fiscal year and record it in the table below. Government Surplus or Year * Expenditures, Deficit, Ballons Billions Billions $118 $119 123 125 122 128 b. At the end of fiscal year 5, what is the total public surplus or debt? $0 billion c. Suppose GDP is $243 billion. What percent of GDP does the public debt represent? percent

Answer 1

The given data is executed in an excel:

1 Year 3 Tax Revenue Gov. Exp. Surplus or deficit 1 118 119 -1 Deficit 21 123 125 -2 Deficit 122 128 -6 Deficit -4 Deficit 5 124 1 Surplus Total Deficit = -12 Debt 127 123 125 If GDP = 243 billion Then Percentage of public debt 4.94%

The excel calculation and formula used are shown below:

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1 Year 2 1 3 2 4 3 Tax Revenue 118 123 122 123 Gov. Exp. 119 125 128 Surplus or deficit =B2-C2 =B3-C3 =B4-C4 =B5-C5 =B6-C6 =SUM(D2:06) Deficit Deficit Deficit Deficit Surplus Debt 127 125 124 Total Deficit = If GDP = 243 billion Then Percentage of public debt =12/243