The "allowable deficit" that causes no change in the debt-GDP ratio is equal to the ________ times ________.

Question

Quizplus · Accepted Answer

The allowable deficit that causes no change in the debt-GDP ratio is equal to the rate of nominal GDP growth times outstanding national debt. This is because if the deficit is equal to the rate of nominal GDP growth multiplied by the outstanding national debt, then the debt will grow at the same rate as the economy, resulting in no change in the debt-GDP ratio. Therefore, the correct answer is C – the rate of nominal GDP growth and outstanding national debt.

The "Allowable Deficit" That Causes No Change in the Debt-GDP