A nation has zero public debt in year 1. It then experiences the following budget situations: • Year 2: Budget deficit of $75 billion Year 3: Budget deficit of $45 billion Year 4: Budget surplus of $20 billion Year 5: Budget deficit of $15 billion a. Calculate the absolute size of its public debt in year 5. b. If its real GDP in year 5 is $230 billion, what is the country's public debt as a percentage of real GDP?
A nation has zero public debt in year 1. It then experiences the following budget situations: • Year 2: Budget deficit of $75 billion Year 3: Budget deficit of $45 billion Year 4: Budget surplus of $20 billion Year 5: Budget deficit of $15 billion a. Calculate the absolute size of its public debt in year 5. b. If its real GDP in year 5 is $230 billion, what is the country's public debt as a percentage of real GDP?
Chapter17: Multinational Capital Structure And Cost Of Capital
Section: Chapter Questions
Problem 1IEE
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Transcribed Image Text:A nation has zero public debt in year 1. It then experiences the following budget
situations:
•
Year 2: Budget deficit of $75 billion
Year 3: Budget deficit of $45 billion
Year 4: Budget surplus of $20 billion
Year 5: Budget deficit of $15 billion
a. Calculate the absolute size of its public debt in year 5.
b. If its real GDP in year 5 is $230 billion, what is the country's public debt as a
percentage of real GDP?
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