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Business

Economics

2.8

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 3SCQ: Is it possible for a nation to run budget deficits and still have its debt GDP ratio fall? Explain...

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Question

If the real interest rate on government bonds is three percent, real GDP grows at one percent, the current debt-to-GDP ratio is forty percent and the primary budget deficit as a percentage of GDP is two percent, then the debt-to-GDP ratio will rise in a year by _____ percentage points.

0.82

2.8

8.2

0.28

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