For each of the following scenarios, state the effect on the debt-to-GDP ratio:

a. The growth rate of the labor force increases.
b. The primary deficit increases.
c. Total factor productivity decreases.
d. Seigniorage decreases.
e. The nominal interest rate is constant and the growth rate of the money supply increases.
f. The nominal interest rate is not constant and the growth rate of the money supply increases.


a. If the growth rate of the labor force increases, the debt-to-GDP ratio will decrease.
b. If the primary deficit increases, the debt-to-GDP ratio will increase.
c. If total factor productivity decreases, the debt-to-GDP ratio will increase.
d. If seigniorage decreases, the debt-to-GDP ratio will increase.
e. If the nominal interest rate is constant and the growth rate of the money supply increases, the debt-to-GDP ratio will decrease.
f. If the nominal interest rate is not constant and the growth rate of the money supply increases, the debt-to-GDP ratio will be ambiguous.

Economics

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