Suppose That a Country Has an Inflation Rate of About

Multiple Choice

Suppose that a country has an inflation rate of about 3 percent per year and a real growth rate of about 5 percent per year. Suppose also that it has nominal GDP of about 100 billion units of currency. What is the highest deficit it can have without raising the debt-to-income ratio?

A) just under 1 billion units
B) just under 3 billion units
C) just under 6 billion units
D) just under 8 billion units