Question

Economy X has a total government debt of $61,000 and Real GDP 67,000.

Economy Y has a total government debt of $73,000 and Real GDP 147,000.

Pick your answer from below and explain your answer:

A. X has a more severe debt problem than Y

B. Y has a more severe debt than X

C. X and Y are equal in terms of their debt situation.

D. More information is needed to answer this question.

Answer 1

Answer Option A)  X has a more severe debt problem than Y

Economy X has a total government debt of $61,000 and Real GDP 67,000.

Economy Y has a total government debt of $73,000 and Real GDP 147,000.

In this case X has more severe debt problem. The reason is that in economy X government debt is increasing fast and is near about equal to the real GDP but in economy Y government debt is increasing at slow speed and real GDP is double to the government debt. Therefore, In economy X debt problem is more severe than the economy Y.