If Real Output Grows at 3 Percent Per Year and the Inflation

question 113

True/False

If real output grows at 3 percent per year and the inflation rate is 3 percent per year then government debt can grow by 6 percent per year and not increase the ratio of debt to income.

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Definitions:

Gold Standard

A monetary system in which the value of currency is directly linked to gold, whereby currencies can be exchanged for a specific amount of gold.

Deflation

Deflation is an economic condition characterized by a general decrease in prices of goods and services, often indicating a reduction in the supply of money or credit.

International Exchange Rate System

The framework through which countries manage the value and exchange of their currencies in relation to one another.

Gold Standard

A currency system that directly correlates the value of a nation's paper money or currency with the value of gold.