Suppose a government has $4,000 billion of debt. This year, real GDP is $8,000 billion, the tax rate is 30 percent, and government spending is $2,000 billion. Which of the following is true?
A)The deficit will decrease by $400 billion.
B)The debt will increase by $400 billion.
C)The deficit will increase by $400 billion.
D)The debt will decrease by $400 billion.
E)Both the deficit and the debt will increase by $400 billion.

Question

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The Answer of Suppose a government has $4,000 billion of debt. This year, real GDP is $8,000 billion, the tax rate is 30 percent, and government spending is $2,000 billion. Which of the following is true?
A)The deficit will decrease by $400 billion.
B)The debt will increase by $400 billion.
C)The deficit will increase by $400 billion.
D)The debt will decrease by $400 billion.
E)Both the deficit and the debt will increase by $400 billion.

Suppose a Government Has $4,000 Billion of Debt