Suppose, for a Hypothetical Country in 2017, the Debt to GDP

question 115

Essay

Suppose, for a hypothetical country in 2017, the debt to GDP ratio was 120 percent and the deficit to GDP ratio was 10 percent. If it were not for interest payments on the debt, this country would have a balanced budget.
(A) What wras the average rate of interest this caunty paid an its tebt?
(B) In 1994 , Italy was reported to heve the sane debt and deficit ratids as this hyothetical caunty. The anly difference was that Italy wauld have had a budet supplus if not far the interest payments an the debt. Was the average rate of interest that Italy paid mare or less than the rate of interest calculated in part (A) above?

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