Suppose that the country of Aquilonia has an inflation rate of about 6 percent per year and a real growth rate of about 3 percent per year. Suppose also that it has nominal GDP of about 500 billion units of currency and current nominal national debt of 100 billion units of domestic currency. Which of the following government spending and taxation figures will keep the debt to income ratio
constant?
a. government spending equal to 50 billion units and tax collections equal to 48 billion units
b. government spending equal to 50 billion units and tax collections equal to 41 billion units
c. government spending equal to 50 billion units and tax collections equal to 40 billion units
d. government spending equal to 50 billion units and tax collections equal to 32 billion units
b
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