How Do Countries Pay Off Debt?
Picture a fraction: debt on top, GDP at the bottom; if the top shrinks or the bottom grows, the ratio falls.
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1.What is the debt ratio?
Picture a fraction: debt on top, GDP at the bottom; if the top shrinks or the bottom grows, the ratio falls.
2.What are the four ways down?
Top down, bottom up: surplus and restructuring act on the top, growth and inflation on the bottom.
3.A country owes 1,000 on a GDP of 1,000 and grows 3 percent for five years. What is the ratio?
GDP is about 1,159 and 1,000 divided by that is 86.3; not one coin was repaid.
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Sources (2)
- IMF Staff Discussion Note SDN/13/07 (2013): Dealing with High Debt in an Era of Low Growth
- Eigene Rechnung (Python, decimal): Schuldenquote-Modell
Education only. Not financial advice.