Question

Calculate the real deficit or surplus in the following cases: a. Inflation is 11 percent. Debt is $1 trillion. Nominal deficit is $90 billion. Instructions: Round your answer to the nearest whole dollar amount. $ billion . b. Inflation is 11 percent. Debt is $1 trillion. Nominal deficit is $150 billion. Instructions: Round your answer to the nearest whole dollar amount. $ billion . c. Inflation is -5 percent. (Price levels are falling.) Debt is $300 billion. Nominal deficit is $40 billion. Instructions: Round your answer to the nearest whole dollar amount. $ billion . d. Inflation is 1 percent. Debt is $3 trillion. Nominal surplus is $50 billion. Instructions: Round your answer to the nearest whole dollar amount. $ billion .

Answer 1

Step-by-step explanation:

The computation is shown below:

As we know that

Real Deficit = Nominal Deficit - (Inflation ×Total Debt)

a.

Real deficit = $90 - (11% × $1,000)

= - $20 billion surplus

b.

Real deficit = $150 - (11% × $1,000)

= $40 billion deficit

c.

Real deficit = $40 - (-5% × $300)

= $55 billion deficit

d.

Real deficit = -$50 - (1% × $3,000)

= - $80 billion surplus