Suppose That a Country Has an Inflation Rate of About

question 3

Multiple Choice

Suppose that a country has an inflation rate of about 2 percent per year and a real GDP growth rate of about 3 percent per year.Then the government can have a deficit of about

• A)6 percent of GDP without raising the debt-to-income ratio.
• B)5 percent of GDP without raising the debt-to-income ratio.
• C)1 percent of GDP without raising the debt-to-income ratio.
• D)None of the above is correct.

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Definitions:

Merchandise

Goods bought and sold by a business in the ordinary course of its trading activities.

Detailed Income Statement

A comprehensive financial statement that summarizes a company’s revenues, expenses, and profits/losses over a specific period.

Business Activities

Economic actions undertaken by a company, ranging from operational to financial transactions.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a net income or loss.