Question

1) Suppose the national debt is $5 trillion and the foreign sector holds 10%. If annual interest paid on the debt is 4% how much income leaks out to the foreign sector? If GDP is $11 trillion, what percent of GDP is the foreign interest payment?

2) Now suppose GDP grown over time to $22 trillion but the Debt is now $24 trillion. The foreign sector holds 28% of the national debt and the annual interest charge is 3%. Recalculate the answers from problem #1.

Answer 1

Pls see table below for both the answers.

Q	Billions	Debt	Foreign share	Debt held by Foreign sector	Rate of interest	Interest to Foreign sector	GDP	Foreign interst payment as % of GDP
1	Today	5,000	10%	500	4%	20	11,000	0.18%
2	Later	24,000	28%	6,720	3%	202	22,000	0.92%