Suppose that at the start of fiscal year 2013 the government had a debt of $6800 billion.Suppose that during fiscal year 2013,real GDP grew by about 5 percent and inflation was about 3 percent.What is the largest deficit the government could have run without raising the debt-to-GDP ratio?
A)about $544 billion
B)about $375 billion
C)about $245 billion
D)about $184 billion

Question

Quizplus · Accepted Answer

The largest deficit without raising the debt-to-GDP ratio is calculated by multiplying the initial debt by the sum of real GDP growth and inflation rates: $6800 billion * (5% + 3%) = $544 billion.

Suppose That at the Start of Fiscal Year 2013 the Government