At the end of 2011 the U.S.government had a debt of about $10.12 trillion.During 2012 inflation was about 2.5% and real GDP grew about 1.6%.What is the largest deficit the government could have had in 2012 without raising the ratio of debt to GDP?
A)about 414.9 billion
B)about 404.8 billion
C)about 253.0 billion
D)about 161.9 billion

Question

Quizplus · Accepted Answer

The nominal GDP growth rate is the sum of real GDP growth and inflation, which is 4.1% (1.6% + 2.5%). To keep the debt-to-GDP ratio constant, the debt can increase by the same percentage, 4.1% of $10.12 trillion, which is approximately $414.9 billion.

At the End of 2011 the U