If the government runs a primary deficit in year zero of B0, and, ...

[biggirl4568]

If the government runs a primary deficit in year zero of B0, and, in year 1, decides to stabilize the debt (i.e., prevent the deficit from rising any further), then in year 1 and beyond, it must run a primary surplus equal to
 
  A) zero.
  B) B0.
  C) (1 + r)B0.
  D) r.
  E) none of the above

Question 2

If the government runs a primary deficit in year zero of B0, and decides to repay it in year t (i.e., bring the debt back down to its pre-existing level), then in year t it must run a primary surplus equal to
 
  A) zero.
  B) one.
  C) B0.
  D) B0(1 + r).
  E) none of the above

[fauacakatahaias]

Answer to Question 1

D

Answer to Question 2

E

[biggirl4568]

Gracias!

[Animal_Goddess]

Excellent