Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Chapter 18, Problem 7E
To determine
Different outcomes of debt-GDP ratio.
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The notation is
Y = GNP = national income
C = consumption
1 = private investment
G = government spending
X = exports
M = imports
T = taxes
S = savings
There is an intimate relationship between a country's BCA and how the country finances its
domestic investment and pays for government expenditures. This relationship is given by BCA = X -
M = (SI) + (TG). Given this, in order for a country to reduce a BCA deficit, which of the following
must occur?
Countries with high levels of debt-to-GDP ratios are poor countries and that countries with low levels of debt-to-GDP ratios are rich countries.
do you agree or disagree with this statement and can you provide real world evidence to support your argument?
Debt-GDP ratios and economic crises: Te debt-GDP ratio in Belgiumexceeded 120% in the early 1990s and has fallen to just over 80% more recently.Italy had a debt-GDP ratio of about 100% even before the euro crisis. Terapid rise in Japan’s debt-GDP ratio was shown in Figure 18.4. Yet none of
these economies experienced defaults or high infation. In contrast, the debt-GDP ratio in Argentina peaked at 65% (up from 35% in 1996) and then a
crisis struck, leading to default and other macroeconomic problems.
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