Rising public debt bad for an economy

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Consider an economy that has accumulated a public debt of $1250 billion over the period of its history through the end of fiscal year 2004. In fiscal year 2005 government spending outlays were $0.75 trillion, and its tax receipts were $0.5 trillion. In fiscal year 2006, government spending outlays were $1 trillion and its tax receipts were $0.9 trillion. In 2007, government spending outlays were $1.2 trillion, and its tax receipts were $1.25 trillion. In 2008, government spending outlays were $1 trillion and its tax receipts were $1 trillion, and in 2009, government spending outlays were $1.25 trillion and its tax receipts were $1.1 trillion. First, what is the public debt at the end of fiscal year 2008? Second, what is the public debt at the end of fiscal year 2009? Third, what is the budget situation for fiscal year 2006? Fourth, what is the budget situation for fiscal year 2008? Fifth, if this economy is projected to run yearly deficits over the next 10 years that increase by 2% each year starting after fiscal year 2009, what is the public debt going to be at the end of fiscal year 2019. Finally, why is rising public debt bad for an economy, from an economics perspective?

Reference no: EM131756645

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