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 200 billion units of currency.What is the highest possible deficit it can have without raising the debt-to-income ratio?

A) just under 1 billion units
B) just under 9 billion units
C) just under 12 billion units
D) just under 16 billion units