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In this causal schematic of a sovereign debt crisis: (1)Debt-to-GDP = (2)Probability of default | = (3)Interest payments ! = (4) Deficit | = (5)Debt-to-GDPt=>,
In this causal schematic of a sovereign debt crisis: (1)Debt-to-GDP = (2)Probability of default | = (3)Interest payments ! = (4) Deficit | = (5)Debt-to-GDPt=>, etc./ austerity measures designed to reduce the government deficit (point 4) may have the undesired effect of intensifying the adverse feedback loop at point 5. The source of this danger is O a. contraction of the macroeconomy @ b. income received by owners of the government debt is reduced @ c. a sharp increase in the value of the government's debt Od. political opposition and toppling of the ruling party
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