Consider changes in the government's debt-to-GDP ratio.Suppose that over a one year period the government has a primary budget surplus,and the real interest rate on government bonds is higher than the growth rate of real GDP.What is the effect on the debt-to-GDP ratio?
A) it will rise
B) it will fall
C) uncertain - it is necessary to know the relative size of the different effects
D) it will remain stable - the two effects cancel each other out
Correct Answer:
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