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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Is it possible for a nation to run budget deficits and still have its debt GDP ratio fall? Explain your answer. Is it possible for a nation to run budget surpluses and still have its debt GDP ratio rise? Explain your answer.

To determine

Whether budget deficits and fall in debt-GDP ratio can coincide. Whether budget surpluses and rise in debt-GDP ratio can coincide.

Explanation

Budget deficit is the excess of government expenditure over government’s tax revenues. Budget surplus is the excess of government’s tax revenues over government expenditure. The debt to GDP ratio (debt to gross domestic product ratio) of a country shows a nation’s public debt as a percentage of its Gross Domestic Product (GDP).

When the government runs a budget deficit, it may/may not imply an increase in debts...

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