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Gross Federal Debt

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Is it possible for the gross federal debt to rise in dollar terms but decline as a percentage of GDP? Explain.

I read that it can, and that it is due to an expanding economy, inflation, businesses and households borrowing $ to buy plants/equipment and homes/consumables, however I do not understand how these reasons are related to the gross federal debt rising and the GDP % declining.

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Solution Summary

Budget deficit as a percentage of GDP calculations

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The federal debt is the total amount government owes to its creditors. We can compare it to GDP by dividing the two values. For example, if the debt is $9 ...

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