Evangel's IB Economics Blog

How can we as the special task force of the council of economic advisors develop an economic policy so that we can ease the economic crisis caused by increase in oil price without increasing the national debt?

In order to answer this question, our group analyzed the statistics given for selected years. We were particularly interested in looking at the national debt, as we were told not to develop a policy that does not require an increase in “already-too-high” national debt: $14 trillion. Upon analyzing the data given, we have noticed that along with increase in nominal national debt, so did the nominal GDP. (Nominal GDP is dollar value of all final goods and services produced by resources in the country in some period of time; it tells the money value of goods and services in different years) Take a look at the graph below:

(Figure 1) Growth of nominal national debt and nominal GDP

Clearly, the nation’s real GDP is increasing in a faster rate than is the national debt. Therefore, the president should not worry about a slight increase in the nominal national debt. It is more important to do something with the economic crisis with some money from the government than to save the money and make the economy fall down even more dramatically.