Question

To understand the quantitative significance of the public debt relative to the economy, it should be: 
A. Divided by the social security trust fund
B. Multiplied by the size of the population
C. Measured as a percentage of GDP
D. Compared to the value of imports and exports

Answer 1

Answer:

C

Explanation:

The GDP measures the market value of all good and services produced in an economy (country or region) in an specific period of time. To understand the significance of the public debt we should compare all of what we produce (GDP) for example in a year and the government debts. If we owe more than what we can produce, then it will take years to the government to pay its debt. If it a high percentage of the GDP, it is also preoccupying because government income is not all of the GDP, and also it has other expenses. So, it is better to use percentages in this case, measure the public debt as a percentage of GDP but also as a percentage of government income (for example:taxes)