Question: Show that Eq. (15.6), which describes how the debt-GDP ratio evolves, still holds if the primary budget deficit, the outstanding stock of government bonds, the

Show that Eq. (15.6), which describes how the debt-GDP ratio evolves, still holds if the primary budget deficit, the outstanding stock of government bonds, the interest rate, and the growth rate of GDP are all expressed in real, rather than nominal, terms. (Hint: Use the growth-rate formulas in the Appendix, Section A. 7, to show that the growth rate of nominal GDP equals the growth rate of real GDP plus the inflation rate.)

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