To track the public debt over time and understand its signiﬁcance to the economy, it is best
A) examined relative to budget surpluses.
B) calculated relative to the money supply.
C) measured relative to the gross domestic product.
D) to compare it to imports, exports, and the trade deﬁcit.

Question

Quizplus · Accepted Answer

Measuring public debt relative to the gross domestic product (GDP) is the most commonly used method as it takes into account the size of the economy. A country with a high level of public debt but a large GDP may still be able to make interest payments and pay off the debt, while a country with a smaller GDP and the same level of public debt may struggle to do so. Examining public debt relative to budget surpluses, calculating it relative to the money supply, and comparing it to imports, exports, and the trade deficit are not as useful for understanding the significance of public debt to the economy.

To Track the Public Debt Over Time and Understand Its