If money and the price level are constant, then the government's real budget deficit is: A)(B^g_t - B^g_t-1)/P. B)B^g_t/P. C)(B_t + B^g_t)/P. D)none of the above.

Question

Quizplus · Accepted Answer

The formula for the real budget deficit is the nominal budget deficit (B^g_t - B^g_t-1) divided by the price level (P). This is because the real budget deficit is the difference between the government's spending and revenue in real terms (adjusted for changes in the price level). Choice A is the correct formula that follows this definition.

If Money and the Price Level Are Constant, Then the Government's