Consider a Government with a Positive Stock of Debt,and Suppose

question 58

Multiple Choice

Consider a government with a positive stock of debt,and suppose the real interest rate on government bonds equals the rate of growth of real GDP.In this case,the government's debt-to-GDP ratio will rise only if

• A)the debt-to-GDP ratio is already high.
• B)the primary budget surplus exceeds the overall budget surplus.
• C)the real interest rate is high.
• D)there is an overall budget deficit.
• E)there is a primary budget deficit.

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Definitions:

Average Cost

A method of inventory valuation which calculates the cost of goods sold and ending inventory based on the average cost of all similar items.

Journal Entries

These are records of all the financial transactions of a business, recorded in the chronological order in which they occur.

Units Sold

The total quantity of products or goods a company has sold during a particular period.

Adjusting Entries

Journal entries made before the preparation of financial statements to ensure that revenues and expenses are recognized in the period they occur.