A Country Is Likely to Be Faced with a Debt

question 37

Multiple Choice

A country is likely to be faced with a debt crisis when

• A)its debt-to-GDP ratio goes above 60 percent
• B)its debt-to-GDP ratio goes above 100 percent
• C)the interest rate on its debt reaches double digits
• D)its creditors believe that there is little chance that they will be paid back
• E)its government fails to implement austerity measures in times of high deficits

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Definitions:

Financial Account

A component of a country’s balance of payments that records transactions of foreign investment and domestic investment abroad, reflecting changes in ownership of international assets.

Financial Account

A component of a country's balance of payments that records transactions involving financial assets and liabilities between residents and non-residents over a period.

Capital Account

A national account that shows the net change in asset ownership for a nation, including assets from financial and physical capital.

Current Account

This term refers to a country's transactions with the rest of the world, including trade in goods and services, earnings on investments, and transfer payments.