Multiple Choice
Suppose a government has $4,000 billion of debt. This year, real GDP is $8,000 billion, the tax rate is 30 percent, and government spending is $2,000 billion. Which of the following is true?
A) The deficit will decrease by $400 billion.
B) The debt will increase by $400 billion.
C) The deficit will increase by $400 billion.
D) The debt will decrease by $400 billion.
E) Both the deficit and the debt will increase by $400 billion.
Correct Answer:
Verified
Correct Answer:
Verified
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