Suppose the Real Interest Rate on Government Bonds Is 5

question 105

Multiple Choice

Suppose the real interest rate on government bonds is 5 percent while the growth rate of real GDP is 4 percent, and that the government's current debt- to- GDP ratio is 30 percent. If the government has a primary budget balance of zero in the current year, the debt- to- GDP ratio will

• A)rise by 3.0 percentage points.
• B)rise by 0.3 percentage points.
• C)remain unchanged.
• D)fall by 3.0 percentage points.
• E)fall by 0.3 percentage points.

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Definitions:

Molecular Cause

The specific interactions at the molecular level that lead to a certain outcome or effect, often used in the context of diseases or chemical reactions.

Gas Phase

A state of matter characterized by unconstrained particle motion and no defined shape or volume, typically achieved at higher temperatures and lower pressures.

Primary Amine

Primary amines are organic compounds containing an amino group (-NH2) attached to a primary carbon atom, involved in a wide range of chemical reactions.

Nitrogen Atom

The basic unit of nitrogen, an element with an atomic number of 7, and essential for life as a constituent of amino acids and nucleic acids.