Email us at knowledgecenter@fool.com. Is the Federal Budget Out of Control? The formula for calculating the ratio is as follows: Where: Debt is the cumulative amount of a country’s government debt; Gross Domestic Product is the total value of goods produced and services produced over a given year . A Tutorial on Debt Dynamics, Consumer Surplus, Consumer Surplus and Deadweight Loss, No public clipboards found for this slide, Debt dynamics, the primary deficit, and sustainability. Looks like you’ve clipped this slide to already. Subsequently, we estimate these equations for Korea, Thailand and Malaysia respectively both for the whole period 1975-2000 and for shorter periods. Consider what happens to the ratio of debt to GDP –which I’ll call DR, for debt ratio — over time. What is the Nairu and Why Does It Matter? See our Privacy Policy and User Agreement for details. . from a linear differential equation in debt per unit of GNP. How to calculate the debt ratio using the equity multiplier (and vice-versa)The debt ratio and the equity multiplier are linked by the following formula: Debt ratio = 1- ( 1 / Equity multiplier ). However, what is classified as debt can differ depending on the interpretation used. Clipping is a handy way to collect important slides you want to go back to later. Your input will help us help the world invest, better! Companies finance their assets through two means: Debt and equity.
D* = equilibrium debt
def = annual deficit
g = rate of real GDP growth
π = rate of inflation