Suppose the budget deficit is rising 4 percent per year and nominal GDP is rising 7 percent per year. How are the debt and the burden on future generations created by these continuing deficits?
A) The debt is sustainable, but the future burden on your children cannot be offset.
B) The debt is not sustainable, and the future burden on your children cannot be offset.
C) The debt is sustainable, and the future burden on your children can be offset if you save for them.
D) The debt is not sustainable, but the future burden on your children can be offset if you save for them.

Question

Quizplus · Accepted Answer

If nominal GDP is growing faster than the budget deficit, the debt-to-GDP ratio is decreasing, making the debt sustainable. Additionally, saving can help offset the future burden on children.

Suppose the Budget Deficit Is Rising 4 Percent Per Year