Country x is a small developing economy. the budget deficit of the government has been rising sharply in the last few years. the government spends a large amount of money to keep unprofitable public sector firms running. it also extends lavish salaries and retirement benefits to government employees. with low tax? revenue, the government has resorted to financing its deficit by issuing bonds. this was expected to lead to an increase in the price level. as the value of the currency? declined, the velocity of money in the country was also expected to rise.? however, while the velocity of money barely? increased, the price level in the economy increased disproportionately.

which of the following can most reasonably be inferred from the above? information?

a. the gdp of country x is likely to be declining.

b. the return on government bonds in country x is

c. interest rates in country x are likely to have increased.

d. income tax rates in country x are low.

e. the public sector employs more people than the private sector in country x.