A government debt larger than the economy's GDP ________.

Question

Quizplus · Accepted Answer

Tax smoothing is a fiscal policy strategy where governments aim to minimize fluctuations in tax rates over time to avoid creating distortions in economic decision-making. A government debt larger than the economy's GDP can indeed be a possible consequence of tax smoothing, especially if the government borrows heavily during times of economic downturn or for significant investments, with the intention of repaying the debt in more prosperous times. This does not necessarily predict future budget deficits, indicate debt repudiation (refusal to pay debts), or imply debt intolerance (an inability to manage or service debt).

A Government Debt Larger Than the Economy's GDP ________