The budget deficit which would result if government expenditure was defined as including the real rather than the nominal interest paid out. For example, consider a government whose budget deficit before adjustment for inflation equals 2 per cent of gross national product (GNP). If net government debt equals half of GNP, and nominal interest rates are 10 per cent whereas inflation is 5 per cent, then nominal debt interest equals 5 per cent of GNP, while real debt interest equals only 2½ per cent of GNP. In this case a nominal budget deficit equal to 2 per cent of GNP corresponds to an inflation-adjusted budget surplus equal to ½ per cent of GNP.