Which statement best explains why the debt-to-GDP ratio is important?
A) If GDP is rising slower than debt, the government is, in some sense, living within its means.
B) A declining debt-to-GDP ratio raises concerns about a country's financial difficulties.
C) It is a better measure than the level of debt because it takes into account a country's political stability.
D) It allows international comparisons of how indebted countries are.

Question

Quizplus · Accepted Answer

The debt-to-GDP ratio is significant because it compares a country's debt level to its economic output, allowing for a relative measure of indebtedness that can be compared across countries, regardless of their absolute levels of debt or GDP. This makes it a useful tool for assessing a country's fiscal health and sustainability of its debt in relation to the size of its economy.

Which Statement Best Explains Why the Debt-To-GDP Ratio Is Important