If the real deficit is $200 billion, the inflation rate is 2.5 percent, and total debt is $2 trillion, then the nominal deficit is:

Question

Quizplus · Accepted Answer

The nominal deficit can be calculated by adding the real deficit to the inflationary increase in the existing debt. The inflationary increase on $2 trillion at 2.5% is $50 billion ($2 trillion * 2.5% = $50 billion). Therefore, the nominal deficit is the real deficit of $200 billion plus the inflationary increase of $50 billion, totaling $250 billion.

If the Real Deficit Is $200 Billion, the Inflation Rate