Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 36 - Part XIII - Six Debates over Macroeconomic Policy - Problems and Applications - Page 816: 6

Answer

No, the budget deficits are not sustainable.

Work Step by Step

The budget deficit is 12%, greater than the nominal GDP growth of 5%. This means that the deficit is growing faster than the nominal GDP. If the budget deficit is maintained at this rate, then future taxes will be much higher. It would likely be wise to save more today to pay the higher future taxes.
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