Neco Model Questions Vol1 2023 Economics Question 12
Practice objective / multiple choice question 12 from the 2023 Neco Model Questions Vol1 Economics examination.
At the beginning of a fiscal year the debt‑to‑GDP ratio is 60 %. The primary deficit equals 2 % of GDP. The real interest rate on government debt is 5 % and the real GDP growth rate is 3 %. Assuming the debt‑to‑GDP ratio evolves according to \(d_{t+1}= \frac{1+r}{1+g}\,d_{t}+p\), where \(p\) is the primary balance as a proportion of GDP (positive for a deficit), what primary balance is required to keep the debt‑to‑GDP ratio unchanged after one year? State the required primary balance as a percentage of GDP (a surplus is a negative number).
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About This Question
This is Neco Model Questions Vol1 2023 Economics Question 12. It is one of the objective questions from the 2023 Neco Model Questions Vol1 Economics examination.
Difficulty level: Medium .
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