Answered: Which of the following, regarding debt…

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter17: Federal Deficits, Surpluses, And The National Debt

Section: Chapter Questions

Problem 7SQP

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Question

Which of the following, regarding debt and growth, is false?

a. If there is no (nominal) GDP growth, the debt/GDP ratio can only be reduced

through fiscal surplus.

b. Furman and Summers argue that the debt/GDP ratio is a misleading measure of

a country's debt burden in an era of low interest rates.

c. The burden of a dollar borrowed by the government today decreases over

time—relative to GDP—if the interest rate on government debt is larger than the

nominal economic growth rate.

d. Blanchard and Leigh found that, following the Great Recession, countries that

enacted fiscal austerity had less economic growth than they expected, and vice- versa

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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