Suppose the budget deficit is rising 2 percent per year and nominal GDP is rising 4 percent per year. How are the debt and the burden on future generations created by these continuing deficits?

Question

Quizplus · Accepted Answer

The debt is sustainable because the nominal GDP is growing faster than the budget deficit, which means the debt-to-GDP ratio is decreasing. The future burden can be offset if savings are made for future generations.

Suppose the Budget Deficit Is Rising 2 Percent Per Year