Question

If a country's debt to GDP is 5% and is expected to grow from 20 billion to 40 billion in the next 25 years, what will the GDP have to be to maintain the current debt to GDP ratio?

A) 800 billion
B) 1 billion
C) 400 billion
D) 2 billion

Answer 1

The GDP will have to be 40 billion to maintain the 5% debt to GDP ratio.

Step-by-step explanation:

To maintain the current debt to GDP ratio of 5%, the GDP will have to be equal to the debt. The current debt is 20 billion and it is expected to grow to 40 billion in the next 25 years. Therefore, the GDP will have to be 40 billion to maintain the 5% debt to GDP ratio.