If money and the price level are constant, then the government's real budget debt is: A)(B^g_t - B^g_t-1)/P. B)B^g_t/P. C)(B_t + B^g_t)/P. D)none of the above.

Question

Quizplus · Accepted Answer

Real budget debt is calculated by dividing nominal budget debt by the price level. Since both money and the price level are constant, the formula becomes (B_t + B^g_t)/P or simply B^g_t/P. Therefore, the correct answer is B.

If Money and the Price Level Are Constant, Then the Government's