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:

Current Account Deficit

A situation where a country's spending on foreign trade and investment exceeds its income from the export of goods and services.

Foreigners

Individuals from a country other than the one in which they are currently present, often referring to non-citizens or non-natives.

Dollars

The official currency of the United States, also used in other countries as an official or de facto currency.

Merchandise Trade

involves the import and export of goods between countries without including services, focusing on physical products.