If Real Output Grows at 3 Percent Per Year and the Inflation

question 113

True/False

If real output grows at 3 percent per year and the inflation rate is 3 percent per year then government debt can grow by 6 percent per year and not increase the ratio of debt to income.

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Definitions:

Lockboxes

Banking service that speeds up collection of payments by having those payments mailed directly to a location accessible by the bank, reducing processing time.

Seasonal Fluctuations

Variations in sales, inventory levels, or business activity that regularly occur at certain times of the year due to seasons.

Corporate Bonds

Debt securities issued by corporations to fund capital improvements, expansions, or other business needs.

Idle Cash

Cash that is not currently invested or used in transactions, often earning minimal or no interest.