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Occupational Health and Safety, Canadian Edition

15th Edition
by David L. Goetsch, University of West Florida and Oskaloosa-Walton Eugene Ozon, Algonquin College
1035 Solutions 49 Chapters 1469 Studied ISBN: 0133450244 Computer Science 5 (1)

Chapters 31: DQ 10

10. Why might economists be quite concerned if the annual interest payments on the U.S. public debt sharply increased as a percentage of GDP?


Step-By-Step Solution

10. Why might economists be quite concerned if the annual interest payments on the U.S. public debt sharply increased as a percentage of GDP?

Answer: The weight of the debt is not its absolute size. Indeed, if there were no interest to be paid on the debt and refinancing was automatic, there would be no debt‑load at all. But interest does have to be paid. Lenders expect that, and to pay the interest the government must either use tax revenues or go deeper into debt. Interest on the debt, then, is important and its weight can best be assessed by noting the size of the interest payments in relation to GDP, since the size of the GDP is a measure of total national income or how much the government can raise in taxes to pay the interest


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