Suppose in the beginning of 2013, a country has a national debt of $8,000 billion. its gdp in 2013 is $32,000 billion and its budget deficit of $1,600 billion. compute its debt–gdp ratio at the end of the year.

30%

Explanation:

Using the formula

Debt to GDP=

Total Debt of country/Total GDP of Country

The total Debt of country in this example is = the sum of the National debt with it's budget deficit.

8 billion+1.6 billion = 9.6 billion

Debt to GDP ratio=

9.6. billion / 32 billion = 0.3 x 100 = 30%

The main purpose of debt-to-GDP ratio is to compare what a country owes with what it produces in a year. The results shows the country’s ability to pay back its debts.

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