Suppose That a Country Has an Inflation Rate of About

question 87

Multiple Choice

Suppose that a country has an inflation rate of about 3 percent per year and a real growth rate of about 3 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 2 billion units
• B) just under 3 billion units
• C) just under 5 billion units
• D) just under 6 billion units

---

Definitions:

Hypotheses

Proposed explanations for a phenomenon, made as a starting point for further investigation, that can be tested by experimentation or observation.

Psychologists

Professionals who study cognitive, emotional, and social processes and behavior by observing, interpreting, and recording how individuals relate to one another and their environments.

Mnemonic Device

A technique a person can use to help them improve their ability to remember something.

Link Method

A memory-aid technique that involves forming a mental association between items in a list to improve recall.