The debt ratio will increase by more in any given year when
A)the real interest rate is lower.
B)the growth rate of GDP is higher.
C)the initial debt ratio is greater.
D)all of the above
E) none of the above

Question

Quizplus · Accepted Answer

The initial debt ratio is the most important determinant of how much the debt ratio will increase in any given year. This is because a higher initial debt ratio means that interest payments on the debt will be a larger proportion of government spending, leaving less room for other expenditures. The real interest rate and growth rate of GDP can also affect the debt ratio, but their impact is smaller compared to the initial debt ratio.

The Debt Ratio Will Increase by More in Any Given