Suppose That in Fiscal Year 2019 the Government Ran a Deficit

Multiple Choice

Suppose that in fiscal year 2019 the government ran a deficit of about $249 billion. The debt at the start of this period was about $5971 billion. Which of the following combinations of inflation and real GDP would have allowed the government to run a deficit this large without raising the debt-to-income ratio?

A) inflation = 2 percent; real GDP growth = 3 percent
B) inflation = 3 percent; real GDP growth = -1.5 percent
C) inflation = 3 percent; real GDP growth = 1 percent
D) inflation = 1.5 percent; real GDP growth = 1 percent