If the budget deficit for each year is held to a constant nominal value during constant inflationary times,then the inflation-corrected or real value of the total debt would
A)Rise at a decreasing rate.
B)Rise at a constant rate.
C)Begin to fall,but then continually rise.
D)Initially rise but eventually would become negative.

Question

Quizplus · Accepted Answer

Holding the budget deficit constant in nominal terms during inflationary periods means that the deficit is increasing in real terms, since the purchasing power of the currency is decreasing. As such, the real value of the total debt would continue to rise, but at a decreasing rate as inflation gradually erodes its value.

If the Budget Deficit for Each Year Is Held to a Constant