Question

What are possible ways that a country can lower its debt-to-gdp ratio? (more than one answer can be correct)

A) Increasing government spending
B) Implementing austerity measures
C) Accelerating economic growth
D) Raising taxes
E) Refinancing existing debt at lower interest rates

Answer 1

Possible ways to lower a country's debt-to-GDP ratio include implementing austerity measures, raising taxes, accelerating economic growth, and refinancing existing debt at lower interest rates.

Step-by-step explanation:

A country can lower its debt-to-GDP ratio through several strategies:

1. Implementing austerity measures: A government can reduce its spending and cut back on unnecessary expenses in order to decrease its debt.
2. Raising taxes: Increasing tax rates can generate additional revenue for the government and help reduce debt.
3. Accelerating economic growth: By stimulating economic activity and increasing GDP, a country's debt-to-GDP ratio can decline.
4. Refinancing existing debt at lower interest rates: By replacing existing debt with debt that has lower interest rates, a country can reduce the overall cost of its debt.

However, increasing government spending (A) would likely be counterproductive towards lowering the debt-to-GDP ratio unless it is directed towards investments that significantly boost economic growth.