Suppose That the Real Rate of Interest Is 3 Percent

question 81

Multiple Choice

Suppose that the real rate of interest is 3 percent and the growth rate of real GDP is 1 percent. If the government has a positive stock of outstanding debt and its goal is to hold the debt- to- GDP ratio constant at its current level, then it

• A)must run an annually balanced budget.
• B)must run a cyclically balanced budget.
• C)must run a primary budget deficit.
• D)must run a primary budget surplus.
• E)must eliminate the overall deficit.

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Definitions:

Committee on Public Information

An independent agency of the U.S. government created during World War I to influence public opinion and promote support for the war through propaganda.

Civil Liberties

Fundamental rights and freedoms protected by law from governmental interference or deprivation.

Socialist Party

Political party demanding public ownership of major economic enterprises in the United States as well as reforms like recognition of labor unions and woman suffrage; reached peak of influence in 1912 when presidential candidate Eugene V. Debs received over 900,000 votes.

U.S. Soldiers

Members of the United States Armed Forces, particularly the Army, who serve and protect the country through military service.