Question

Assume we start year 1 with a total government debt of $20 million. what happens at the end of each year?

in year 1 the government spends $425 million and collects $365 million in taxes.
- public saving in year 1 is equal to $ _____ million.

Answer 1

The government incurs a budget deficit of $60 million in year 1, resulting in public saving being negative $60 million.

Step-by-step explanation:

In year one, the government starts with a total debt of $20 million and it spends $425 million while collecting $365 million in taxes.

The difference between spending and taxes collected is the budget deficit for the year, which is $425 million minus $365 million, adding up to a $60 million deficit. Therefore, public saving in year 1 is equal to negative $60 million (indicating dis-saving or an increase in debt).

In year 1, the government spends $425 million and collects $365 million in taxes.

To calculate public saving in year 1, we subtract government spending from tax revenue: $365 million - $425 million = -$60 million. Therefore, public saving in year 1 is equal to -$60 million.