Math Problem Statement

Assume a country's GDP is $180 billion, and government spending equals $36.9 billion. Most economists in the country note a significant increase in government spending relative to the previous century. They relate the increase to the implementation of efficient automatic stabilizers. In the previous century, government spending as a share of GDP was 2.1% .

Calculate by how many percentage points government spending as a share of GDP has changed relative to the last century. Round your answer to one decimal place if necessary and enter in the box.

Solution

To calculate the change in government spending as a share of GDP relative to the previous century, we can follow these steps:

  1. Calculate the current government spending as a share of GDP:

    Current share=Government spendingGDP×100\text{Current share} = \frac{\text{Government spending}}{\text{GDP}} \times 100

    Using the values given:

    Current share=36.9180×100\text{Current share} = \frac{36.9}{180} \times 100

  2. Calculate the current share value:

    Current share=20.5%\text{Current share} = 20.5\%

  3. Determine the change in government spending as a share of GDP:

    The previous century’s share was 2.1%, so:

    Change=Current sharePrevious share=20.5%2.1%\text{Change} = \text{Current share} - \text{Previous share} = 20.5\% - 2.1\%

  4. Calculate the difference:

    Change=18.4 percentage points\text{Change} = 18.4 \text{ percentage points}

Thus, the government spending as a share of GDP has changed by 18.4 percentage points relative to the last century.

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Math Problem Analysis

Mathematical Concepts

Percentage Calculation
Ratio and Proportion

Formulas

Current share = (Government Spending / GDP) * 100
Change = Current share - Previous share

Theorems

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Suitable Grade Level

Grades 9-10