Tuesday, August 3, 2010

Debt-Threshold





Threshold as some measure of GDP may not be, but the measures, itself, we choose to take after running deficits and debts to cover the deficit could be. I mean the moment we start realizing that debt has become a burden on GDP and can not be satiated with the GDP, in the next period(s), through taxes, without affecting the level of demand or other measures like paying out of our foreign-exchange reserves or simply resorting to print currency and pay-off debts without losing our purchasing power and adding to inflation. But, the best measure to decide the threshold is that we cannot pay the debt out of our GDP in the next period(s) without affecting demand. And, there could be second, third, or fourth thresholds as we can decide as per our priorities.

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