Question

		government
year	revenue	Expenditures
1946	39.3	55.2
1947	38.5	54.5
1948	41.6	29.8
1949	39.4	38.8
1950	39.6	42.6

suppose the level of debp at the end of 1945 was 350$

a. use the information in the table above to determine the debt level at the end of 1947.

Answer 1

(a)

In year 1946, Revenue = 39.3 and Government expenditure = 55.2. So Government expenditure > Revenue and thus in order to fulfil this expenditure they will have to borrow which will increase debt.  Thus, They must have additional debt of 55.2 - 39.3 = 15.9 due to year 1946.

So, Debt at the end of Year 1946 = Debt at end of year 1945 + Additional debt due to year 1946 = 350 + 15.9 = 365.9

In year 1947, Revenue = 38.5 and Government expenditure = 54.5. So They must have additional debt of 54.5 - 38.5 = 16 due to year 1947.

So, Debt at the end of Year 1947 = Debt at end of year 1946 + Additional debt due to year 1947 = 365.9 + 16 = 381.9

Hence, Debt level at the end of 1947 = $381.9