Question

Unlike households, governments are often able to sustain large debts. For example, in 2013, the U.S. government's total debt reached S17.3 trillion, approximately equal to 101.6% of GDP. At the time, according to the U.S. Treasury, the average interest rate paid by the government on its debt was 2.0%. However, running budget deficits becomes hard when very large debts are outstanding. Calculate the dollar cost of the annual interest on the government's total debt assuming the interest rate and debt figures cited above. $3.56 billion $356 billion $534 billion $178 billion

Answer 1

the dollar cost of the annual interest on the government's total debt assuming the interest rate and debt is $356 billion

Step-by-step explanation:

Dollar cost of annual interest on total debt = Total debt for the year x Average interest rate

= $17.3 trillion x 2%

= $17,300 billion x 2%

= $346 billion

This value is closest to option (2).