A debt that rises faster than nominal GDP will impose the following opportunity costs in the future:

Question

Quizplus · Accepted Answer

If a country's debt rises faster than its nominal GDP, it means that the economy is not growing fast enough to keep up with the increasing debt burden. In such a scenario, the government will have to take measures to tackle the debt problem, which would mean higher taxes or reduced government spending, both of which would lead to lower economic growth. A period of inflation may also follow, further exacerbating the debt problem and causing other problems, such as currency depreciation and lower purchasing power for consumers. Therefore, all of the options listed above are potential opportunity costs of a rising debt-to-GDP ratio.

A Debt That Rises Faster Than Nominal GDP Will Impose