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Debt Sustainability Analysis: Indicators and Assessment

Description: This quiz will test your understanding of the concepts and indicators used in debt sustainability analysis.
Number of Questions: 15
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Tags: debt sustainability indicators assessment
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Which of the following is NOT a key indicator of debt sustainability?

  1. Debt-to-GDP ratio

  2. Interest-to-revenue ratio

  3. Current account balance

  4. Inflation rate


Correct Option: D
Explanation:

Inflation rate is not a key indicator of debt sustainability, as it does not directly measure the government's ability to repay its debt.

A debt-to-GDP ratio of 60% is generally considered to be:

  1. Sustainable

  2. Unsustainable

  3. Moderately sustainable

  4. Highly sustainable


Correct Option: C
Explanation:

A debt-to-GDP ratio of 60% is generally considered to be moderately sustainable, as it is above the safe threshold of 40% but below the unsustainable threshold of 80%.

Which of the following is NOT a factor that can affect a country's debt sustainability?

  1. Economic growth

  2. Interest rates

  3. Exchange rate

  4. Political stability


Correct Option: D
Explanation:

Political stability is not a direct factor that can affect a country's debt sustainability, as it does not directly impact the government's ability to repay its debt.

The interest-to-revenue ratio measures the:

  1. Government's ability to repay its debt

  2. Government's ability to generate revenue

  3. Government's debt burden

  4. Government's fiscal deficit


Correct Option: C
Explanation:

The interest-to-revenue ratio measures the government's debt burden, as it shows how much of the government's revenue is used to pay interest on its debt.

A current account deficit can lead to:

  1. Increased foreign debt

  2. Depreciation of the currency

  3. Higher inflation

  4. All of the above


Correct Option: D
Explanation:

A current account deficit can lead to increased foreign debt, depreciation of the currency, and higher inflation.

Which of the following is NOT a common method for assessing debt sustainability?

  1. Debt-to-GDP ratio analysis

  2. Interest-to-revenue ratio analysis

  3. Cash flow analysis

  4. Scenario analysis


Correct Option: C
Explanation:

Cash flow analysis is not a common method for assessing debt sustainability, as it is more commonly used for assessing the financial health of a company.

Scenario analysis is used to:

  1. Assess the impact of different economic scenarios on a country's debt sustainability

  2. Identify potential risks to debt sustainability

  3. Develop strategies to improve debt sustainability

  4. All of the above


Correct Option: D
Explanation:

Scenario analysis is used to assess the impact of different economic scenarios on a country's debt sustainability, identify potential risks to debt sustainability, and develop strategies to improve debt sustainability.

Which of the following is NOT a common indicator of external debt sustainability?

  1. Debt-to-export ratio

  2. Debt service-to-export ratio

  3. Current account balance

  4. Foreign exchange reserves


Correct Option: C
Explanation:

Current account balance is not a common indicator of external debt sustainability, as it is more commonly used for assessing a country's overall economic health.

The debt service-to-export ratio measures the:

  1. Government's ability to repay its external debt

  2. Government's ability to generate foreign exchange

  3. Government's external debt burden

  4. Government's trade balance


Correct Option: C
Explanation:

The debt service-to-export ratio measures the government's external debt burden, as it shows how much of the country's export earnings are used to pay interest and principal on its external debt.

Which of the following is NOT a common strategy for improving debt sustainability?

  1. Fiscal consolidation

  2. Debt restructuring

  3. Economic growth

  4. Inflation targeting


Correct Option: D
Explanation:

Inflation targeting is not a common strategy for improving debt sustainability, as it is more commonly used for achieving price stability.

Fiscal consolidation involves:

  1. Reducing government spending

  2. Increasing government revenue

  3. Both of the above

  4. None of the above


Correct Option: C
Explanation:

Fiscal consolidation involves both reducing government spending and increasing government revenue in order to reduce the fiscal deficit and improve debt sustainability.

Debt restructuring involves:

  1. Rescheduling the repayment of debt

  2. Reducing the interest rate on debt

  3. Forgiving a portion of debt

  4. All of the above


Correct Option: D
Explanation:

Debt restructuring involves rescheduling the repayment of debt, reducing the interest rate on debt, and/or forgiving a portion of debt.

Which of the following is NOT a common type of debt sustainability analysis?

  1. Deterministic analysis

  2. Stochastic analysis

  3. Dynamic analysis

  4. Static analysis


Correct Option: C
Explanation:

Dynamic analysis is not a common type of debt sustainability analysis, as it is more commonly used for assessing the long-term impact of different policies on the economy.

Stochastic analysis is used to:

  1. Assess the impact of random shocks on a country's debt sustainability

  2. Identify potential risks to debt sustainability

  3. Develop strategies to improve debt sustainability

  4. All of the above


Correct Option: D
Explanation:

Stochastic analysis is used to assess the impact of random shocks on a country's debt sustainability, identify potential risks to debt sustainability, and develop strategies to improve debt sustainability.

Which of the following is NOT a common type of debt sustainability indicator?

  1. Debt-to-GDP ratio

  2. Interest-to-revenue ratio

  3. Current account balance

  4. Human capital index


Correct Option: D
Explanation:

Human capital index is not a common type of debt sustainability indicator, as it is more commonly used for assessing a country's overall economic development.

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