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Economists agree that a government is likely to default on its debt if the debt-GDP ratio...

Economists agree that a government is likely to default on its debt if the debt-GDP ratio is

a. small, but growing at a positive rate.

b. above 50 percent.

c. above 100 percent.

d. It depends on many country specific factors.

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Answer #2

Correct option - (d) It depends on many country specific factor.

For example- in 2017 Greece had the debt- GDP ratio 182% while Japan had 232% still Greece defaulted not Japan because most of Japan's debt was held by it's citizens where as debt of Greece was held by foreign investors and banks. In simple words source of debt is an important factor. Most of the developed countries have relatively high debt-GDP ration still they are less likely to default because of their capacity to generate higher income to pay off debt.

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