A fiscal policy is considered sustainable when the debt-to-GDP ratio is ________,and it is considered unsustainable when the debt-to-GDP ratio is ________.

Question

Quizplus · Accepted Answer

A sustainable fiscal policy occurs when the debt-to-GDP ratio is stable or decreasing, indicating that the government is able to manage its debt in relation to the overall size of the economy. An unsustainable fiscal policy occurs when the debt-to-GDP ratio is increasing, which suggests that the government is accruing debt at a rate that is not manageable given the size of the economy. Therefore, the correct answer is B, as the debt-to-GDP ratio must be stable or decreasing for a fiscal policy to be considered sustainable, while an increasing ratio indicates an unsustainable fiscal policy.

A Fiscal Policy Is Considered Sustainable When the Debt-To-GDP Ratio