Suppose That in Fiscal Year 2013 the Government Ran a Deficit

question 91

Multiple Choice

Suppose that in fiscal year 2013 the government ran a deficit of about $160 billion.The debt at the start of this period was about $6126 billion.Which of the following combinations of inflation and real GDP would have allowed the government to run a deficit this large without raising the debt-to-income ratio?

• A)inflation = 2 percent; real GDP growth = 3 percent
• B)inflation = 3 percent; real GDP growth = -1.5 percent
• C)inflation = 2 percent; real GDP growth = 1 percent
• D)inflation = 1.5 percent; real GDP growth = 1 percent

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