The difference between the official and correct measures of the deficit will be smaller,
A)the higher is government spending.
B)the higher is the level of debt, B.
C)the smaller is inflation.
D)none of the above

Question

Quizplus · Accepted Answer

Inflation affects the nominal value of government spending and revenues. Smaller inflation means less deviation from the true value and thus a smaller difference between the official and correct measures of the deficit. The level of debt or government spending does not directly affect the calculation of the deficit.

The Difference Between the Official and Correct Measures of the Deficit