Suppose the Real Rate of Interest on Government Bonds Is

question 116

Multiple Choice

Suppose the real rate of interest on government bonds is 4% and the growth rate of real GDP is 2%.If the government has a positive stock of outstanding debt and its policy objective is to hold the debt-to-GDP ratio constant at its current level,it must

• A)eliminate the overall deficit.
• B)run an annually balanced budget.
• C)run a cyclically balanced budget.
• D)run a primary budget deficit.
• E)run a primary budget surplus.

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Definitions:

Net Earnings

The amount of income left over after all deductions, including taxes, expenses, and allowances, have been subtracted from gross earnings.

SUTA Purposes

Relating to State Unemployment Tax Act, it's for state-level funding of unemployment benefits.

FUTA Tax

Federal Unemployment Tax Act tax, used to fund state workforce agencies.

Timely Deposits

The IRS requirement that taxpayers must deposit certain types of taxes (e.g., payroll taxes) by specific deadlines to avoid penalties.