If a Budget Deficit as a Percent of GDP Is

question 97

Multiple Choice

If a budget deficit as a percent of GDP is greater than the growth of real output,the national debt will

• A)decrease relative to the size of the economy.
• B)decrease in nominal terms.
• C)increase in nominal terms but decrease relative to the size of the economy.
• D)increase relative to the size of the economy.

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Definitions:

Disposable Income

The net income available to households or individuals after accounting for taxes, which can be spent on consumption or savings.

Consumption

The use of goods and services by households, one of the primary components that determine the overall level of economic activity in an economy.

Billion

A numerical value represented as 1,000 million (1,000,000,000) in the short scale, commonly used in financial and demographic statistics.

MPS

The marginal propensity to save, which is the proportion of an additional unit of income that is saved rather than spent.