Question

The U.S. Congressional Budget Office has projected the debt-to-GDP ratio to increase dramatically in the future. One of the major reasons is the:
A.

projection of a high population growth rate.


B.

forecast of a recession.


C.

projected increasing health care costs for the aging population.


D.

forecast of negative economic growth.

Answer 1

Answer:

C.  projected increasing health care costs for the aging population.

Explanation:

If the debt to GDP ration increases, it means that the country will owe more money compared to capacity of creating wealth. A common problem for several developed countries is that the proportion or retired people has increased compared to the total active labor force. This means that the number of people working or searching of jobs relative to the number of retired people has decreased. Even though retired people tend to have more accumulated wealth, their living expenses are also much higher. What makes this situation a problem is that retired people only have passive income, they do not have earned income. And generally speaking, passive income grows at a much lower rate that earned income.

This is why many developed countries started to implement immigration policies focusing on highly trained and educated applicants that can replace their native workforce.