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Which of the following describes the concept of debt sustainability (in the context of a country's...

Which of the following describes the concept of debt sustainability (in the context of a country's national debt):

1.The level of debt is not changing.

2.The level of debt is decreasing.

3.The debt-to-GDP ratio is not increasing.

4.The debt-to-GDP ratio is decreasing.
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Answer #1

Answer is 3.

Sustainable debt is defined as the level of debt that allows a debtor country pay its current as well future debt obligations i full without requiring debt relief or accumulating arrears.

Debt to GDP (DTG) ratio is the ratio between country's government debt and its GDP.

Low DTG ratio signifies that an economy producing and selling goods and services is sufficient to repay its debt without taking further debt. Therefore low DTG ratio is considered as sound .

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