As Long as Debt Grows by the Same Percentage as Nominal

question 37

True/False

As long as debt grows by the same percentage as nominal GDP,the debt-to-GDP ratio will stay constant but the interest payments-to-GDP ratio will increase.

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Definitions:

Long-run Equilibrium

A state in which all factors of production are optimally allocated in the long term, resulting in the efficient operation of markets with no tendencies for change under constant conditions.

Average Total Cost

Average Total Cost is the total cost of production divided by the quantity of output produced, encompassing both fixed and variable costs in the calculation.

Economic Profits

The financial gains that exceed the opportunity costs of a business's resources, considering both explicit and implicit costs.

Perfectly Competitive

A market structure characterized by a complete absence of rivalry among firms, where all firms sell identical products and no single firm can influence the market price.