Question

Consider the economy of Athenia. In 2018, Athenia has a GDP of $100 billion and a net national debt of $50 billion. Over the next 5 years, Athenia experiences economic growth, increasing its GDP to $120 billion in 2023. During the same 5 year period, the net national debt increases to $55 billion. Calculate Athenia's debt ratio for 2018 and 2023.

Answer 1

2018 50 %

2023 45.8%

Step-by-step explanation:

Calculation for Athenia's debt ratio for 2018 and 2023

Calculation for 2018 Athenia’s debt ratio using this formula

2018 Athenia’s debt ratio=2018 Net national debt/2018 GDP

Let plug in the formula

2018 Athenia’s debt ratio= ( $50 billion/$100 billion)

2018 Athenia’s debt ratio =50 %

Calculation for 2023 Athenia’s debt ratio Using this formula

2023 Athenia’s debt ratio=2023 Increase in Net national debt/2023 Increase in GDP

Let plug in the formula

2023 Athenia ‘s debt ratio ($55 billion/$120 billion )

2023 Athenia ‘s debt ratio=45.8%

Therefore Athenia's debt ratio for 2018 will be $50% and 2023 will be 45.8%