Which of the following will cause a reduction in the debt-to-GDP ratio?
A)an increase in the real interest rate
B)an increase in the ratio of the primary deficit to GDP
C)an increase in the growth rate of output
D)all of the above

Question

Quizplus · Accepted Answer

An increase in the growth rate of output will cause both the debt and the GDP to increase, but the debt will increase less than the GDP, leading to a reduction in the debt-to-GDP ratio. A) an increase in the real interest rate will increase the burden of interest payments and may cause an increase in the debt-to-GDP ratio. B) an increase in the ratio of the primary deficit to GDP will cause the debt-to-GDP ratio to increase, as the primary deficit is the difference between government spending and non-interest revenue.

Which of the Following Will Cause a Reduction in the Debt-To-GDP