Final answer:
To determine the total government debt at the end of year three, the initial debt is combined with deficits from years one and two and the surplus from year three, resulting in a total debt of $4.7 billion.
Step-by-step explanation:
To calculate the total government debt at the end of year three, we need to account for the initial debt and the subsequent surpluses and deficits in the following years. The government starts with a total debt of $3.5 billion. In year one, it runs a deficit of $400 million, in year two, a deficit of $1 billion, and in year three, it runs a surplus of $200 million.
To find the total debt after these three years, we add the deficits to the initial debt and subtract the surplus:
- Initial Debt: $3.5 billion
- Deficit Year One: +$0.4 billion
- Deficit Year Two: +$1 billion
- Surplus Year Three: -$0.2 billion
Calculation:
$3.5 billion + $0.4 billion + $1 billion - $0.2 billion = $4.7 billion
Therefore, the total government debt at the end of year three is $4.7 billion.