Suppose That a Country Has an Inflation Rate of About

Multiple Choice

Suppose that a country has an inflation rate of about 2 percent per year and a real GDP growth rate of about 2.5 percent per year.Then the government can have a deficit of about

A) 5 percent of GDP without raising the debt-to-income ratio.
B) 4.5 percent of GDP without raising the debt-to-income ratio.
C) 1.25 percent of GDP without raising the debt-to-income ratio.
D) .5 percent of GDP without raising the debt-to-income ratio.