Question

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

Answer 1

expected inflation rate does not change real deficit

Step-by-step explanation:

given data

Inflation = 20 percent

Debt = $2 trillion

nominal deficit = $300 billion

expected inflation rate falls = 20% to 15%

solution

we know that real deficits is real variable

and that is not affected by any change in inflation rate because inflation is nominal variable

so we can say nominal value of deficits can be affected but real value of deficits will be remain the same