Try the following exercises to better understand how the national debt is related to the government's budget deficit. a.Assume that the gross national debt initially is equal to $3 trillion and the federal government then runs a deficit of $300 billion: i.What is the new level of the gross national debt? ii. If 100 percent of the deficit is financed by the sale of securities to federal agencies, what happens to the amount of debt held by the public? What happens to the level of gross debt? iii. If GPD increased by 5 percent in the same year that the deficit is run, what happens to gross debt as a percentage of GDP? What happens to the level of debt held by the public as a percentage of GDP?
Try the following exercises to better understand how the national debt is related to the government's budget deficit.
a.Assume that the gross national debt initially is equal to $3 trillion and the federal government then runs a deficit of $300 billion:
i.What is the new level of the gross national debt?
ii. If 100 percent of the deficit is financed by the sale of securities to federal agencies, what happens to the amount of debt held by the public? What happens to the level of gross debt?
iii. If GPD increased by 5 percent in the same year that the deficit is run, what happens to gross debt as a percentage of GDP? What happens to the level of debt held by the public as a percentage of GDP?
GDP refers to the total value of finished goods and services that produced within the economic boundary during the period of time.
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