Consider a Government with an Outstanding Stock of Public Debt

question 81

Multiple Choice

Consider a government with an outstanding stock of public debt.If,in any given year,the government has a primary budget surplus and the real interest rate on government bonds is less than the growth rate of real GDP,then

• A)debt-service payments will be eliminated.
• B)the debt-to-GDP ratio is certainly negative.
• C)the debt-to-GDP ratio will certainly rise.
• D)the debt-to-GDP ratio will certainly fall.
• E)real GDP will certainly rise.

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Definitions:

First Law of Thermodynamics

A principle stating that energy cannot be created or destroyed, only transformed from one form to another.

Second Law of Thermodynamics

A fundamental principle of physics stating that the total entropy of an isolated system can never decrease over time, and is constant if and only if all processes are reversible.

Entropy

A measure of disorder or randomness in a system, often associated with the second law of thermodynamics, stating that entropy within a closed system tends to increase over time.

Two Laws of Thermodynamics

Fundamental principles of physics that describe energy conservation and the increase of entropy, respectively, in a closed system.