The fiscal situation in the United States and in other countries From the FRED economic database at the Federal Reserve Bank of St. Louis, you can retrieve two series: General Government Gross Debt of the United States (GGGDTAUSA188N) and a measure of the primary deficit (USAGGXONLBGDP). Both are measured as a percent of GDP. These are measures that incorporate all levels of government. This data are constructed by the International Monetary Fund (IMF). Using data from the IMF or other international organizations helps make a better comparison across countries.

a. What is the ratio of debt to GDP in the United States in the most recent available year? Describe the path of this variable in the last decade?

b. What is the change in the ratio of debt-to-GDP in the last year of the data? Can the debt-to-GDP ratio fall even if the primary deficit is positive?

c. Use the information on the change in the debt-to-GDP ratio and the primary deficit ratio to infer the missing term in equation (22.5) in the last year of the data. Does your calculation make sense to you?

d. Similar data are constructed for all countries. A convenient source that compares the fiscal situation for the overall government sector in the G7 countries is published by Canada's Department of Finance in a document called the "Fiscal Reference Tables." The section titled International Fiscal Comparisons at the end of the document presents the most recent data. Which large economy has the highest and lowest ratio of gross debt to GDP? Which country has the highest and lowest deficit as a percent of GDP? Are these overall deficits or primary deficits?

Data from equation 22.5

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B B-1 B-1 (G- T) = = (r- g) + Y Y-1 Y-1 Y