If the nominal deficit is $200 billion, the real deficit is $150 billion, and total debt is $2 trillion, then inflation is:

Question

Quizplus · Accepted Answer

The real deficit is adjusted for inflation, whereas the nominal deficit is not. The difference between the nominal and real deficits ($200 billion - $150 billion = $50 billion) represents the inflation effect on the deficit. To find the inflation rate, divide the inflation effect by the nominal deficit: $50 billion / $200 billion = 0.25 or 25%. However, this calculation is incorrect based on the given choices and the context of the question. The correct approach to find the inflation rate should involve understanding how inflation affects the value of the deficit, but without additional information on how the nominal and real deficits relate to the total debt and inflation calculation, the provided explanation doesn't accurately solve the given problem. The correct explanation should involve understanding the relationship between nominal and real values and inflation, typically using the formula for adjusting nominal values to real values considering inflation, but the provided numbers and choices do not align with a straightforward calculation.

If the Nominal Deficit Is $200 Billion, the Real Deficit