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Public debt is the sum of deficits and surpluses (negative deficits) over time. Suppose that a country has no public debt in year 1 but experiences a budget deficit of $40 billion in year 1, a budget deficit of $20 billion in year 2, a budget surplus of $10 billion in year 3, and a budget deficit of $2 billion in year. What is the absolute size of its public debt in year 4?

Respuesta :

Answer:

$52 billion

Explanation:

Given:

No public debt in year 1

budget deficit of $40 billion in year 1

budget deficit of $20 billion in year 2

budget surplus of $10 billion in year 3

budget deficit of $2 billion in year

Now,

The public debt is the sum of deficits and surpluses over time.

The country started year 1 with no public debt,

Thus,

The country's debt at the end of year 4

= deficit year 1 + deficit year 2 - surplus year 3 + deficit year 4

= $40 + $20 - $10 + $2 billion

= $52 billion

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