In an economy with a constant cash deficit d, a long-run inflation rate , and long-run real GDP growth rate n + g, the equilibrium debt-to-GDP ratio is

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The equilibrium debt-to-GDP ratio in an economy with a constant cash deficit d, a long-run inflation rate $\pi$, and long-run real GDP growth rate $n + g$ is given by the formula $(d/Y) /(n + g + \pi)$. This formula accounts for the effects of growth and inflation on the ability of an economy to manage its debt relative to its GDP.

In an Economy with a Constant Cash Deficit D, a Long-Run