Question

If a country's debt-to-GDP ratio if currently 50% and its debt is expected to grow from $40 trillion to $50 trillion in the next 5 years, what will the country's GDP have to be in 5 years to maintain the current debt-to-GDP ratio?
a. 80 Trillion $
b. 25 Trillion $
c. 20 Trillion $
d. 100 Trillion $

Answer 1

Answer =  D. $100 trillion

Solution =

Country's debt-to-GDP ratio if currently 50% = $\frac{1}{2}$

⇒ $\frac{Debt}{GDP} = \frac{1}{2}$

⇒ GDP = 2(Debt)

So right now ,when debt is 40 trillion, GDP will be 2×40 = 80 trillion

After 5 years when debt is 80 trillion, GDP will be 2×50 = 100 trillion