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Suppose that a country has no public debt in year 1 but experiences a budget deficit of $40 billion in year 2, a budget deficit of $20 billion in

Suppose that a country has no public debt in year 1 but experiences a budget deficit of $40 billion in year 2, a budget deficit of $20 billion in year 3, a budget surplus of $10 billion in year 4, and a budget deficit of $2 billion in year 5.

a. What is the absolute size of its public debt in year 5?     

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b. If its real GDP in year 5 is $104 billion, what is this country’s public debt as a percentage of real GDP in year 5?     

 

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