From the end of 2003 to the end of 2004, the United States ran a deficit of about $121 billion. The debt at the start of this period was about $3,924 billion. Which of the following combinations of inflation and real GDP would have allowed the government to run a deficit and kept the ratio of real GDP to the deficit about the same?
A) about 1% inflation and about 1% real GDP growth
B) about 1% inflation and about 3% real GDP growth
C) about 2% inflation and about 1% real GDP growth
D) about 2% inflation and about 2% real GDP growth
Correct Answer:
Verified
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