Only. Need part E

Suppose that Greek GDP in 2011 amounts to 400 billion euros, while Greek debt in the same year amounts to 700 billion euros. Assume that, every year, the interest rate on the debt is 8 percent, and that tax revenues are 30% of GDP

(a) How large is the Greek Debt to GDP ratio in 2011? = 175%

(b) How much does Greece have to pay in interest payments in 2011? = 56 Billion euros

(c) If government purchases plus transfers in 2011 equal 124 billion euros, how large is the primary deficit of Greece? And the overall deficit? How large will the debt be in 2012? = 68 Billion, 180 Billion, 880 Billion

(d) Assuming that GDP in 2012 shrinks by 3% (i.e., GDP in 2012 is 3% lower than in 2011), what will be the debt/GDP ratio in 2012? = 165.60

(e) How large would spending cuts (reductions in government purchases plus transfers) have to be in order to eliminate the primary deficit in 2011? How large would the cuts have to be in order to run a balanced budget?