For example, suppose that real output in the United States grows at approximately 5%. If the inflation rate is 2% per year, this means that nominal income must be growing at a rate of per year. Because nominal income grows over time, the nation's ability to pay back the national debt also rises. Therefore, as long as the nation's income growsThan the government debt, the level of debt can continue to increase without harming the economy. In this case, the nominal government debt can rise byeach year without increasing the debt-to-income ratio.