If the government deficit/GDP ratio remains constant at 6% a year, the real GDP growth rate is 4% a year and the real interest rate is 1%, the public debt/GDP ratio will converge to the equilibrium level at O 210% O 305% 208% O 368%

If the government deficit/GDP ratio remains constant at 6% a year, the real GDP growth rate is 4% a year and the real interest rate is 1%, the public debt/GDP ratio will converge to the equilibrium level at O 210% O 305% 208% O 368%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

If the government deficit/GDP ratio remains constant at 6% a year, the real GDP growth rate is 4% a year and the real interest
rate is 1%, the public debt/GDP ratio will converge to the equilibrium level at
O 210%
O 305%
O 208%
O 368%

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Consider the following data about government debt and deficit in a given year - real interest rate on government bonds = 1% -growth rate of real GDP = 1% - current debt-to-GDP ratio = 25% - primary budget deficit as a percentage of GDP = 2% Over this one-year period the debt-to-GDP ratio will have O A. risen by 0.2 percentage points. OB. remained unchanged. OC. risen by 2 percentage points. OD. fallen by 2 percentage points. O E. fallen by 0.2 percentage points.
Assume an economy exists for 3 periods. The government's budget balance in period 1 is $150 and the present discounted value of the government's budget balance in period 2 is -$110. If the initial debt is equal to $200, the present discounted value of the government's budget balance in period 3 must be Select one: O a. $100 O b. $160 O c. -$160 d. $0 e. -$100
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