Question

Melanie is concerned with the growing national debt in her home country of Germany. Which true statement could you offer to help her form a more complete picture of the situation?

The austerity measures imposed on Germany after the global financial crisis have not been as effective as in other European nations.

Germany has a debt-to-GDP ratio below that of the United States and many other wealthy, developed nations.

As the nation with the highest debt-to-GDP ratio, Germany will be forced to make future budgetary changes.

Germany’s debt-to-GDP ratio far exceeds that of Greece, a country recently at a strong risk of default.

Deficits are a more important measure, as the national debt resets with the beginning of a new fiscal year.

Answer 1

As the nation with the highest debt-to-GDP ratio, Germany will be forced to make future budgetary changes.

As the country's debt grows, it is forced to make some budgetary changes in the form of decreasing spending or imposing more taxes or both. These measures are taken to lower deficits and avoid a debt crisis in the future. The government can also give sops to increases the consumptions and collect more taxes for reducing debt. This is done by bringing some policy changes through parliament.