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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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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