I cannot figure this our for the life of me!Assume that the gross national debt initially is equal to $3 trillion and the federal government then runs a deficit of $300 billion. What is the new level of gross national debt? What happens to the amount of debt held by the public? What happens to the level of gross debt? When the government runs a deficit, it can borrow from the public and the level of gross debt increases. What happens to gross debt as a percentage of GDP? What happens to the level of debt held by the public percentage of GDP?
Now suppose that the gross national debt initially is equal to $2.5 trillion and the federal government then runs a deficit of $100 billion. What is the new level of gross national debt? What happens to the amount of debt held by the public? What happens to the level of gross debt? What happens to gross debt as a percentage of GDP? What happens to the level of debt held by the public percentage of GDP?
To solve the first scenario, assuming the gross national debt initially is equal to $3 trillion and the federal government runs a deficit of $300 billion, we can follow these steps:
Step 1: Find the new level of gross national debt.
To calculate the new level of gross national debt, add the deficit to the initial debt:
New gross national debt = Initial debt + Deficit
New gross national debt = $3 trillion + $300 billion
Step 2: Determine the amount of debt held by the public.
To calculate the amount of debt held by the public, subtract the deficit from the new gross national debt:
Debt held by the public = New gross national debt - Deficit
Step 3: Analyze the changes in gross debt and debt held by the public as a percentage of GDP.
When the government runs a deficit, it can borrow from the public, causing the gross debt to increase. The specific change in gross debt and debt held by the public as a percentage of GDP will depend on the GDP figures for the given period.
Now moving on to the second scenario, assuming the gross national debt initially is equal to $2.5 trillion and the federal government runs a deficit of $100 billion:
Step 1: Find the new level of gross national debt.
To calculate the new level of gross national debt, add the deficit to the initial debt:
New gross national debt = Initial debt + Deficit
New gross national debt = $2.5 trillion + $100 billion
Step 2: Determine the amount of debt held by the public.
To calculate the amount of debt held by the public, subtract the deficit from the new gross national debt:
Debt held by the public = New gross national debt - Deficit
Step 3: Analyze the changes in gross debt and debt held by the public as a percentage of GDP.
Again, the changes in gross debt and debt held by the public as a percentage of GDP will depend on the GDP figures for the given period.
To answer these questions, we need to understand a few concepts related to government debt and deficits. Let's break it down step by step.
1. Gross National Debt: This refers to the total debt issued by the federal government. It includes all the debt held by the public (such as bonds sold to individuals, corporations, and foreign governments) and debt held by government entities like the Federal Reserve.
2. Deficit: A deficit occurs when the government spends more money than it collects in revenue during a specific period, usually a fiscal year. The deficit is financed by issuing more debt, either by selling bonds to the public or borrowing from other sources.
Now, let's look at the first scenario:
- The gross national debt initially is $3 trillion.
- The federal government runs a deficit of $300 billion.
To find the new level of gross national debt, we need to add the deficit to the initial level of debt:
$3 trillion + $300 billion = $3.3 trillion.
The amount of debt held by the public increases when the government runs a deficit because it needs to borrow from the public to finance the shortfall. Therefore, the debt held by the public would increase by $300 billion.
The level of gross debt also increases by the amount of the deficit, so it would increase by $300 billion.
When considering the gross debt as a percentage of GDP (Gross Domestic Product), we need to compare the debt to the size of the economy. If the economy (GDP) remains unchanged, the debt as a percentage of GDP would increase since the debt increases while the GDP stays the same.
Similarly, the level of debt held by the public as a percentage of GDP would also increase since the debt held by the public increases while the GDP remains the same.
Now, let's move on to the second scenario:
- The gross national debt initially is $2.5 trillion.
- The federal government runs a deficit of $100 billion.
To find the new level of gross national debt:
$2.5 trillion + $100 billion = $2.6 trillion.
Again, the amount of debt held by the public would increase by the deficit amount, so it would increase by $100 billion.
The level of gross debt would increase by the amount of the deficit, so it would increase by $100 billion.
Regarding the debt as a percentage of GDP, if GDP remains unchanged, the gross debt as a percentage of GDP would increase. The level of debt held by the public as a percentage of GDP would also increase.
In summary:
1st scenario:
- Gross national debt: $3.3 trillion
- Debt held by the public: Increases by $300 billion
- Gross debt percentage of GDP: Increases
- Debt held by the public percentage of GDP: Increases
2nd scenario:
- Gross national debt: $2.6 trillion
- Debt held by the public: Increases by $100 billion
- Gross debt percentage of GDP: Increases
- Debt held by the public percentage of GDP: Increases
Please note that these explanations assume no changes in other relevant factors, such as GDP growth or debt repayment. Real-world scenarios are more complex and involve additional factors to consider.