If the budget deficit for each year is held to a constant nominal value during constant inflationary times,then the inflation-corrected or real value of the total debt would
A)Rise at a decreasing rate.
B)Rise at a constant rate.
C)Begin to fall,but then continually rise.
D)Initially rise but eventually would become negative.

Question

Quizplus · Accepted Answer

Holding the budget deficit constant in nominal value during inflationary times means that the deficit is increasing in real value. However, as the debt accumulates, the impact of inflation on the real value of the debt decreases. Therefore, the inflation-corrected or real value of the total debt would rise at a decreasing rate.

If the Budget Deficit for Each Year Is Held to a Constant