$$\begin{array} { | c | c | c | c | }
\hline & \begin{array} { c }
\text { eGovernment } \
\text { Spending }
\end{array} & \text { Tax Revenues } & \text { GDP } \
\hline \text { Year 1 } & \$ 800 & \$ 825 & \$ 4,000 \
\hline \text { Year 2 } & 850 & 850 & 4,200 \
\hline \text { Year 3 } & 900 & 875 & 4,350 \
\hline \text { Year 4 } & 950 & 900 & 4,500 \
\hline \text { Year 5 } & 1,000 & 925 & 4,600 \
\hline
\end{array}$$ The table contains budget information for a hypothetical economy. All data are in billions of dollars. Assume that Year 1 is the ?rst year for this economy and Year 5 is the current year. What is the public
Debt in this economy at Year 5?
A) $25 billion
B) $75 billion
C) $125 billion
D) $925 billion

Question

$$\begin{array} { | c | c | c | c | } 
\hline & \begin{array} { c } 
\text { eGovernment } \
\text { Spending }
\end{array} & \text { Tax Revenues } & \text { GDP } \
\hline \text { Year 1 } & \$ 800 & \$ 825 & \$ 4,000 \
\hline \text { Year 2 } & 850 & 850 & 4,200 \
\hline \text { Year 3 } & 900 & 875 & 4,350 \
\hline \text { Year 4 } & 950 & 900 & 4,500 \
\hline \text { Year 5 } & 1,000 & 925 & 4,600 \
\hline
\end{array}$$ The table contains budget information for a hypothetical economy. All data are in billions of dollars. Assume that Year 1 is the ?rst year for this economy and Year 5 is the current year. What is the public
Debt in this economy at Year 5?
A) $25 billion
B) $75 billion
C) $125 billion
D) $925 billion

Quizplus · Accepted Answer

To find the public debt, we need to use the formula: public debt = cumulative budget deficit. To find the cumulative budget deficit, we need to subtract the cumulative tax revenue from the cumulative eGovernment spending.

$$\begin{array} { | c | c | c | c | } 
\hline & \begin{array} { c } 
\text { eGovernment } \
\text { Spending }
\end{array} & \text { Tax Revenues } & \text { Cumulative GDP } \
\hline \text { Year 1 } & \$ 800 & \$ 825 & \$ 4,000 \
\hline \text { Year 2 } & 850 & 850 & 8,200 \
\hline \text { Year 3 } & 900 & 875 & 12,550 \
\hline \text { Year 4 } & 950 & 900 & 17,050 \
\hline \text { Year 5 } & 1,000 & 925 & 21,650 \
\hline \text { Cumulative } & \$ 4,500 & \$4,375 & \
\hline
\end{array}$$

Cumulative eGovernment spending = $4,500 billion
Cumulative tax revenues = $4,375 billion
Cumulative budget deficit = $4,500 billion - $4,375 billion = $125 billion

Therefore, the public debt in this economy at Year 5 is $125 billion.

The Table Contains Budget Information for a Hypothetical Economy