Suppose That a Country Has an Inflation Rate of About

question 5

Multiple Choice

Suppose that a country has an inflation rate of about 3 percent per year and a real growth rate of about 5 percent per year. Suppose also that it has nominal GDP of about 100 billion units of currency. What is the highest possible deficit it can have without raising the debt-to-income ratio?

• A) just under 3 billion units
• B) just under 5 billion units
• C) just under 8 billion units
• D) just under 15 billion units

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Definitions:

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