Question: Examine the consequences for a hypothetical developing economy if the rate of borrowing to fund a fiscal deficit is growing annually at a faster rate

Examine the consequences for a hypothetical developing economy if the rate of borrowing to fund a fiscal deficit is growing annually at a faster rate than the GDP. Include a graphical analyses using the below hypothetical numbers and percentages.

GDP = R1000

Fiscal Deficit = R1200

GDP is used to settle / pay for fiscal deficits.

Therefore R1000 - R1200 = R200. This implies that the deficit keeps on growing.

Remember the GDP equation and the impact of imports and exports.

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