If the federal government runs a budget deficit,and the budget deficit as a percent of GDP is equal to the growth rate of real output,the

Question

Quizplus · Accepted Answer

If the budget deficit as a percent of GDP is equal to the growth rate of real output, the national debt will remain a constant share of GDP. This is because the deficit is being financed by borrowing, which increases the debt, but economic growth is also increasing the GDP, which offsets the increase in debt as a share of the economy. The dollar value of the debt may still increase, but the focus of the question is on the debt as a share of GDP.

If the Federal Government Runs a Budget Deficit,and the Budget