Which Statement Best Explains Why the Debt-To-GDP Ratio Is Important

question 193

Multiple Choice

Which statement best explains why the debt-to-GDP ratio is important?

• A) If GDP is rising slower than debt, the government is, in some sense, living within its means.
• B) A declining debt-to-GDP ratio raises concerns about a country's financial difficulties.
• C) It is a better measure than the level of debt because it takes into account a country's political stability.
• D) It allows international comparisons of how indebted countries are.

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Definitions:

Sales

The total amount of money generated from selling goods or services.

Degree of Operating Leverage

A ratio that measures the sensitivity of a company's operating income to a percentage change in revenue.

High-low Method

A technique used in accounting and finance to estimate variable and fixed components of a cost based on the highest and lowest activity levels.

Cost Analysis

The process of assessing the costs involved in carrying out a particular business activity or project.