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 decides to repay it in year t (i.e., bring the debt back down to its pre- existing level) , then in year t it must run a primary surplus equal to:

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