The debt-service ratio is the______________?
Correct answer: B. interest and principle payments divided by exports of goods and services
- A. long-term debt divided by GDP of a country in a given year
- B. interest and principle payments divided by exports of goods and services
- C. ratio of debt net of portfolio investment financing and foreign direct investment
- D. default and reschedule debt minus annual export revenues that must be devoted to paying interest
Explanation
The debt-service ratio measures the burden of external debt payments by comparing interest and principal repayments with export earnings from goods and services. GDP and capital-flow measures describe other debt indicators, not debt servicing capacity.
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