If the Government Runs a Primary Deficit in Year Zero

Multiple Choice

If the government runs a primary deficit in year zero of B0, and, in year 1, decides to stabilise the debt (i.e., prevent the deficit from rising any further) , then in year 1 and beyond, it must run a primary surplus equal to:

A) B0.
B) zero.
C) rB0.
D) B0(1 + r) .
E) B0(1 + r) t.