The government budget constraint tells us that the budget deficit is equal to
A)interest on the debt.
B)the primary deficit.
C)the primary deficit plus interest on the debt.
D)imports minus exports.
E) the primary deficit plus the trade deficit plus interest on the debt.

Question

Quizplus · Accepted Answer

The government budget constraint states that the budget deficit is equal to the sum of the primary deficit and the interest paid on the government debt. Therefore, option C, which states that the budget deficit is equal to the primary deficit plus interest on the debt, is the correct answer. Option A is incorrect as it refers only to the interest paid on the debt, without including the primary deficit. Options B and E are also incorrect, as they do not include the interest paid on the debt. Option D is incorrect as it is unrelated to the government budget constraint.

The Government Budget Constraint Tells Us That the Budget Deficit