
Does the size of the regime’s debt and the size of the budget deficit indicate potential problems for the economy in any of these cases?
1. The regime’s debt is relatively low, but the regime is running a large budget deficit as it builds a high-speed rail system to connect the major cities of the nation.
2. The regime’s debt is relatively high due to a recently finished deficit-financed war, but the regime is now running only a small budget deficit.
3. The regime’s debt is relatively low, but the regime is running a budget deficit to finance the interest payments on the debt.
