If the Government Runs a Primary Deficit in Year Zero

question 1

Multiple Choice

If the government runs a primary deficit in year zero of B₀,and decides to repay it in year t (i.e.,bring the debt back down to its pre-existing level) ,then in year t it must run a primary surplus equal to

• A)zero.
• B)one.
• C)B₀.
• D)B₀(1 + r).
• E) none of the above

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