It discusses Britain’s upcoming fiscal expansion in the form of increased spending and tax cuts. This is a change of pace from their policy of austerity in response to the financial crisis nearly 10 years ago.
Despite the fiscal expansion, The Economist notes that they estimate the public debt-to-GDP ratio is actually shrinking.
Here’s the prompt I’d like you all to answer, and to turn in along with homework #5 (you can write or type it in at the end of the assignment): How is it possible that the debt-to-GDP ratio shrinks even with a fiscal expansion? What does this tell us about the size of the budget deficit and how quickly Britain’s economy is growing?
Note that you can answer these questions in just a few sentences (6-8 max). I’m not asking for you to look up any specific numbers or data or anything – just take what we learned about the debt-to-GDP ratio in class and apply it to this case.