Which of the following will cause an increase in the debt-to-GDP ratio?
A) a reduction in the real interest rate
B) a reduction in the ratio of the primary deficit to GDP
C) a reduction in the growth rate of output
D) all of the above
C
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Given its production possibilities curve, the optimal combination of outputs for a society: a. is beyond the production possibilities curve
b. is at the midpoint of the production possibilities curve. c. is inside the production possibilities curve. d. depends on the preferences of that society.
Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower