Consider an economy such that at the beginning of this year the debt-income ratio is 80% The Treasury expects the following numerical values of the relevanteconomic indicators at the end of this year:

vPrimary budget showing a deficit of 20% of gdp

v Nominal interest rate 2.5% ,

v Inflation rate 0.5%, and

v Real GDP growth rate 4% ,

Question 4

From the preceding information, it follows that the change in the debt-income will be

A.Zero

B.The economy is on the steady-state path

C.Less than or equal to zero

D.Positive

E.Not enough information is supplied to provide an answer

Question 5

The numerical value of the debt income ratio at the beginning of next year will be, approximately,

A..80

B..82

C..79

D..85

E.No enough information is supplied to provide an answer.

Question 6

In which quadrant is the economy located?

A.Not enough information is supplied to provide an answer

B.Quadrant IV

C.Quadrant III

D.Quadrant II

E.Quadrant I