Question

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

a. What is the absolute size of its public debt in year 4?

Answer 1

$32 billion

Step-by-step explanation:

Data provided in the question:

Year Budget deficit

1 0

2 $40 billion

3 -$10 billion [negative sign depicts surplus]

4 $2 billion

Now,

The absolute size of its public debt in year 4

= $40 billion - $10 billion + $2 billion

= $32 billion

Hence,

The absolute size of its public debt in year 4 is $32 billion