Posted by **Jenny** on Monday, April 14, 2008 at 11:24pm.

The following calculations help you see how the ratio of debt to GDP changes from one year to the next. Suppose that in a hypothetical country with a currency called the ducat, debt is equal to 140 trillion ducats and GDP is equal to 100 trillion ducats. This means that the ratio of debt to GDP is 1.4, or 140%. Also, suppose that the deficit is 7 trillion ducats, which is 7% of GDP.

When the government runs a deficit, it spends more than it collects in tax revenue. To make up the difference, it borrows. So if it runs a deficit of 7 trillion ducats, debt increases by 7 trillion ducats. So debt next year is 147 trillion ducats. Suppose that there is no growth in real GDP and inflation is equal to -2% per year. (Negative inflation is the same as deflation.) Measured in ducats, what will GDP be equal to next year?

---What formula do i use to solve this?

V=GDP/m?

- Macroeconomics -
**economyst**, Tuesday, April 15, 2008 at 9:48am
do you have a question?

## Answer This Question

## Related Questions

- macroeconomics - b. Now suppose that the gross national debt initially is equal ...
- Economics - Assume that the gross national debt initially is equal to $3 ...
- economics grad level - I cannot figure this our for the life of me!Assume that ...
- College Econ - The gross national debt initially is equal to $2.5 trillion and ...
- college-economics - The gross national debt initially is equal to $3 trillion ...
- economics - I have a couple of questions, thanks so much. If a country were to ...
- MATH 12 - Canada's national debt fluctuates. It is affected by financial markets...
- Macroeconomics - If GDP increases by 5 percent in the same that the deficit is ...
- Economics - What is the % of GDP is the national debt? My Answer: The percentage...
- Macroeconomics - Consider the following data: The money supply in $1 trillion, ...

More Related Questions