Economics · Public Finance
Consider the following statements: Statement I: Rising public debt-to-GDP ratios can limit a government's ability to respond to future economic shocks. Statement II: Public debt primarily affects governments through lower interest payments, enabling higher welfare spending. Statement III: Increasing public debt often forces governments to curtail discretionary spending or raise taxes, thereby impacting taxpayers directly. Which one of the following is correct in respect of the above statements?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Neither Statement II nor Statement III is correc t.
- 2Only one of the Statements II and III is corre ct, and that explains Statement I.✓
- 3Both Statement II and Statement III are correct, but only one of them explains Statement I.
- 4Both Statement II and Statement III are correct, and both of them explain Statement I.
Correct answer
Only one of the Statements II and III is corre ct, and that explains Statement I.
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