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Q. 2

Expert-verified
Found in: Page 319

### Economics Today

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.

See the step by step solution

## Step 1: Calculation year 2015.

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" $BudgetDeficitaspercentageofGDP=\frac{Budgetdeficit}{GDP}×100$

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

$BudgetDeficitaspercentageofGDP=3.55percent$

## Step 2: Calculation year 2016.

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:-

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

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

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

## Step 3: Calculation year 2017.

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:-

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

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

$BudgetDeficitaspercentageofGDP=3.35percent$

## Step 4: Calculation year 2018.

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:-

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

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

$BudgetDeficitaspercentageofGDP=3.36percent$