Suppose that in fiscal year 2019 the government ran a deficit of about $249 billion. The debt at the start of this period was about $5971 billion. Which of the following combinations of inflation and real GDP would have allowed the government to run a deficit this large without raising the debt-to-income ratio?
A) inflation = 2 percent; real GDP growth = 3 percent
B) inflation = 3 percent; real GDP growth = -1.5 percent
C) inflation = 3 percent; real GDP growth = 1 percent
D) inflation = 1.5 percent; real GDP growth = 1 percent
Correct Answer:
Verified
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