Consider Changes in the Government's Debt-To-GDP Ratio

question 71

Multiple Choice

Consider changes in the government's debt-to-GDP ratio.Suppose that over a one year period the government has a primary budget surplus,and the real interest rate on government bonds is higher than the growth rate of real GDP.What is the effect on the debt-to-GDP ratio?

• A)it will rise
• B)it will fall
• C)uncertain - it is necessary to know the relative size of the different effects
• D)it will remain stable - the two effects cancel each other out

---

Definitions:

Competitive Forces

The external factors that influence the competitive position of a firm in an industry or market.

Interdependent

A situation where entities or individuals depend on each other, often seen in economic and social settings.

Oligopoly

A market structure in which a few firms dominate the market, leading to a high level of market concentration.

Oligopolistic Industry

A market structure characterized by a small number of firms whose decisions affect and are affected by each other, leading to strategic behavior and interdependence.