Consider a Government with an Outstanding Stock of Public Debt

question 38

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 more than the growth rate of real GDP,then

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

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Definitions:

Money Income

Income received in the form of currency or through electronic transfers, as opposed to goods or services.

Products J and K

Imaginary or hypothetical products, potentially used in theoretical examples or economic models.

Consumer Equilibrium

A state in which a consumer has allocated their income in a way that maximizes their utility, given their budget constraint.

MU/P Ratio

The Marginal Utility to Price ratio, used in economic analysis to evaluate the satisfaction received from consuming an additional unit of a good relative to its cost.