Chapter 12: Debt, Deficits and Economic Dynamics

Suppose the nominal interest rate is 2% and the growth rate of GDP is 7%. If the government maintains a policy of running a constant deficit equal to d% of GDP every year, what is the approximate value of d consistent with a steady state value of debt equal to twice the GDP? 42. 5. 8. 9. Answer: D Question 5 ................
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