Question

If a country debt to gdp ratio is currently 20% and it debt is expected to grow from 50 billion dollars to 100 Biko dollars in the next 30 years, what will the country gdp have to be in 30 years to maintain the current debt to gdp ratio

Answer 1

To calculate the required GDP in 30 years to maintain the current debt-to-GDP ratio, we need to determine the current GDP and the expected increase in debt.

Let's assume the current GDP is represented by "X."

First, let's find the current debt by multiplying the current debt-to-GDP ratio by the current GDP:

Debt (current) = 20% * X = 0.20X

We are given that the debt is expected to grow from 50 billion dollars to 100 billion dollars, which is an increase of 100 billion - 50 billion = 50 billion dollars.

So, the future debt (in 30 years) is given by:

Debt (future) = Debt (current) + Debt increase
Debt (future) = 0.20X + 50 billion

Now, let's calculate the expected GDP in 30 years to maintain the current debt-to-GDP ratio:

Debt-to-GDP ratio (future) = Debt (future) / GDP (future)

Since the debt-to-GDP ratio is given as 20%:

0.20 = (0.20X + 50 billion) / GDP (future)

To solve for GDP (future), we multiply both sides of the equation by GDP (future):

0.20 * GDP (future) = 0.20X + 50 billion

0.20 * GDP (future) = 0.20X + 50,000,000,000 (in dollars)

Now, we can rearrange the equation to solve for GDP (future):

GDP (future) = (0.20X + 50,000,000,000) / 0.20

GDP (future) = X + 250,000,000,000

Therefore, in 30 years, the country's GDP will need to be X + 250,000,000,000 dollars to maintain the current debt-to-GDP ratio.