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Q. 2

Expert-verifiedFound in: Page 319

Book edition
19th

Author(s)
Roger Miller

Pages
753 pages

ISBN
9780134478777

Suppose that the Office of Management and Budget provides the estimates of federal budget receipts, federal budget spending, and GDP shown below, all expressed in billions of dollars. Calculate the implied estimates of the federal budget deficit as a percentage of GDP for each year.

The budget deficit in 2015 is $3.55$ percent of GDP.

The budget deficit in 2016 was $3.37$ percent of GDP.

The budget deficit in 2017 is $3.35$ percent of GDP.

The budget deficit in 2018 is $3.36$ percent of GDP.

In the year 2015,

$Federalbudgetreceipts=\$3,829.8$

$Federalbudgetspending=\$4,382.6$

$GDP=\$15,573.2$

Calculating the budget deficit:-

$BudgetDeficit=FederalBudgetSpending-FederalBudgetReceipt$

$BudgetDeficit=\$4,382.6-\$3,829.8$

$BudgetDeficit=\$552.8$

Calculating the budget deficit as percentage of GDP:-

role="math" localid="1651583575267" $BudgetDeficitaspercentageofGDP=\frac{Budgetdeficit}{GDP}\times 100$

role="math" localid="1651584084850" $BudgetDeficitaspercentageofGDP=\frac{\$552.8}{\$15,573.2}\times 100$

$BudgetDeficitaspercentageofGDP=3.55percent$

In the year 2016,

$Federalbudgetreceipts=\$3,892.4$

$Federalbudgetspending=\$4,441.6$

$GDP=\$16,316.0$

$BudgetDeficit=FederalBudgetSpending-FederalBudgetReceipt$

$BudgetDeficit=\$4,441.6-\$3,892.4$

$BudgetDeficit=\$549.2$

Calculating the budget deficit as percentage of GDP:-

$BudgetDeficitaspercentageofGDP=\frac{Budgetdeficit}{GDP}\times 100$

$BudgetDeficitaspercentageofGDP=\frac{\$549.2}{\$16,316.0}\times 100$

role="math" localid="1651584228109" $BudgetDeficitaspercentageofGDP=3.37percent$

In the year 2017,

$FederalBedgetreceipts=\$3,964.2$

role="math" $FederalBedgetSpending=\$4,529.3$

$GDP=\$16,852.1$

$BudgetDeficit=FederalBudgetSpending-FederalBudgetReceipt$

$BudgetDeficit=\$4,529.3-\$3,964.2$

$BudgetDeficit=\$565.1$

Calculating the budget deficit as percentage of GDP:-

$BudgetDeficitaspercentageofGDP=\frac{Budgetdeficit}{GDP}\times 100$

$BudgetDeficitaspercentageofGDP=\frac{\$565.1}{\$16,852.1}\times 100$

$BudgetDeficitaspercentageofGDP=3.35percent$

In the year 2018,

$FederalBudgetreceipts=\$4,013.5$

$FederalBudgetSpending=\$4.600.1$

$GDP=\$17,454.4$

$BudgetDeficit=FederalBudgetSpending-FederalBudgetReceipt$

$Budgetdeficit=\$4,600.1-\$4,013.5$$Budgetdeficit=\$586.6$

Calculating the budget deficit as percentage of GDP:-

$BudgetDeficitaspercentageofGDP=\frac{Budgetdeficit}{GDP}\times 100$

$BudgetDeficitaspercentageofGDP=\frac{\$586.6}{\$17,454.4}\times 100$

$BudgetDeficitaspercentageofGDP=3.36percent$

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