Chapter 12: Debt, Deficits and Economic Dynamics

The nominal interest rate is 5% and the growth rate of nominal GDP is 6%. Calculate the steady state ratio of debt to GDP. Answer: 10.6 Question 30. In Xanadu, the government is running a budget deficit equal to 5% of GDP. If the nominal interest rate is 3% and the growth rate of nominal GDP is 4%, calculate the steady state ratio of debt to GDP. ................
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