At the end of 2012,the government had a debt of about $11.3 trillion.If during 2013 real GDP rose 2% and inflation was 2.2%,what is the largest deficit the government could have run without raising the debt-to-GDP ratio?
A)about $226.0 billion
B)about $248.6 billion
C)about $474.6 billion
D)about $561.8 billion

Question

Quizplus · Accepted Answer

The debt-to-GDP ratio remains constant if the deficit equals the growth in nominal GDP. Nominal GDP growth is the sum of real GDP growth (2%) and inflation (2.2%), totaling 4.2%. Applying this to the $11.3 trillion debt gives a maximum deficit of approximately $474.6 billion.

At the End of 2012,the Government Had a Debt of About