Suppose That a Country Has an Inflation Rate of About

question 7

Multiple Choice

Suppose that a country has an inflation rate of about 3 percent per year and a real growth rate of about 6 percent per year. Suppose also that it has nominal GDP of about 100 billion units of currency. What is the highest deficit it can have without raising the debt-to-income ratio?

• A)just under 1 billion units
• B)just under 3 billion units
• C)just under 6 billion units
• D)just under 9 billion units

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Definitions:

Certified Check

A check for which the bank confirms that sufficient funds exist in the account to cover the check, and so sets aside the amount needed until the check is cashed or expires.

Cashier's Check

A check issued by a bank, drawing on its own funds rather than that of a personal account holder, guaranteeing payment to the payee.

Bank Liability

The legal obligations or debts that a bank is responsible for, such as deposits and loans.

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Modified or changed in a way that demonstrates a high level of expertise or craftsmanship.