If the Budget Deficit for Each Year Is Held to a Constant

question 55

Multiple Choice

If the budget deficit for each year is held to a constant nominal value during constant inflationary times,then the inflation-corrected or real value of the total debt would

• A)Rise at a decreasing rate.
• B)Rise at a constant rate.
• C)Begin to fall,but then continually rise.
• D)Initially rise but eventually would become negative.

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Definitions:

Accumulated Other Comprehensive Income

A component of shareholders' equity that includes unrealized gains and losses on certain types of investments, not recognized in the income statement.

Stock Dividends Distributable

A liability account that records the amount of dividends declared by the company to be paid out in the form of additional shares.

Retained Earnings

The portion of net income that is retained by the company rather than distributed to its owners as dividends.