Real deficit change problem

Reference no: EM13695103

Inflation is 20 percent. Debt is $2 trillion. The nominal deficit is $300 billion. If the expected inflation rate falls from 20 percent to 15 percent, by how much does the real deficit change?

a. The real deficit rises by 15 percent.

b. The effects of a change in expected inflation cannot be quantified.

c. The real deficit falls by 15 percent.

d. Expected inflation does not change the real deficit.

Reference no: EM13695103

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