The difference between the official and correct measures of the deficit will be greater,
A)the lower is government spending.
B)the lower is the level of debt, B.
C)the higher is inflation.
D)none of the above

Question

Quizplus · Accepted Answer

The difference between the official and correct measures of the deficit will be greater when inflation is higher because inflation reduces the real value of fixed nominal government debt, making the official measure of the deficit less accurate in reflecting the government's true fiscal position.

The Difference Between the Official and Correct Measures of the Deficit