1.After a disappointing 2019, Trantor's president has enacted an increase in government spending aimed at boosting the real GDP growth rate in the near term. The estimated impact of this policy is reported in the column for 2020 in the table.

2019 2020

Real GDP Growth Rate 1.00 3.00

Inflation Rate 3.00 3.50

Interest Rate 4.00 5.00

Government Primary defict 1.00 4.00

Government total Defict 6.60 10.50

Government DDebt ( end of period) 150 x

a. What is the projected debt-to-GDP ratio in Trantor for 2020?

b. How do you interpret the rise in market interest rates? In your response, consider the long-run debt implications of the higher interest rates and the evolving incentives of the government

c. Given the new interest rate, what primary surplus (as a share of GDP) is needed to keep the debt-to-GDP ratio stable at its 2021 level?