Text Problem 14-2 Question Help Suppose that the Office of Management and Budget

Question

Text Problem 14-2 Question Help Suppose that the Office of Management and Budget provides the accompanying estimates of federal budget receipts, federal budget spending, and GDP, all expressed in billions of dollars. Calculate the implied estimates of the federal budget deficit as a percentage of GDP for each year. (Enter each response as a percentage rounded to one decimal place. Do not include a plus or minus sign.) Federal Budget Receipts (2% growth) $2,329.8 Federal Budget Spending (2% growth) $2,682.6 2,736.3 GDP (1 % growth) $14,573.2 14,718.9 14,866.1 15,014.8 Deficit as a % of GDP Year 2015 2016 2017 2018 [1% 2,376.4 2,423.9 2,472.4 2,791.0 2,846.8 % 1%

Explanation / Answer

Deficit as % of GDP = [(Federal budget spending - Federal budget receipts) / GDP] x 100%

Therefore,

2015: [(2,682.6 - 2,329.8) / 14,573.2] x 100 = (352.8 / 14,573.2) x 100 = 2.4%

2016: [(2,736.3 - 2,376.4) / 14,718.9] x 100 = (359.9 / 14,718.9) x 100 = 2.4%

2017: [(2,791.0 - 2,423.9) / 14,866.1] x 100 = (367.1 / 14,866.1) x 100 = 2.5%

2018: [(2,846.8 - 2,472.4) / 15,014.8] x 100 = (374.4 / 15,014.8) x 100 = 2.5%

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