It is 2024, and you are an economic advisory team tasked with assessing the situationin two hypothetical Caribbean countries: Islandia and Caribana. Islandia has a public debt-to-GDP ratio of 120%, largely accumulated through decades of government borrowing for infrastructure development and social programs. The country has seen slow economic growth, high interest payments on debt, and reduced public investment in recent years. Caribana has a lower debt-to-GDP ratio of 65%, but is facing rising debt levels dueto external shocks, including a recent hurricane that devastated its tourismindustry. The country is debating whether to take on more debt to rebuild and invest in climateresilient infrastructure. Questions 1. Analyze how high government debt can affect economic growth in the context of Islandia. 2. a) Briefly explain the relationship between government borrowing and economic growth. b) At what point does borrowing become harmful for countries like Islandia and Caribana? Explain. 3. Evaluate whether or not the government of Caribana should take on more debt to build its economy after the hurricane? Provide real-world examples. 4. Select two Caribbean countries and one non-Caribbean country that usuallyborrow(s) from the IMF. Present the most recent data about how much they currentlyowe the IMF. Comment on each country’s ability to repay the loans over the years. 5. Discuss the role of international financial institutions (e.g., IMF, World Bank) inhelping Caribbean nations manage their debt. Provide real-world example
It is 2024, and you are an economic advisory team tasked with assessing the situationin two hypothetical Caribbean countries: Islandia and Caribana. Islandia has a public debt-to-GDP ratio of 120%, largely accumulated through decades of government borrowing for infrastructure development and social programs. The country has seen slow economic growth, high interest payments on debt, and reduced public investment in recent years. Caribana has a lower debt-to-GDP ratio of 65%, but is facing rising debt levels dueto external shocks, including a recent hurricane that devastated its tourismindustry. The country is debating whether to take on more debt to rebuild and invest in climateresilient infrastructure.
Questions 1. Analyze how high government debt can affect economic growth in the context of Islandia.
2. a) Briefly explain the relationship between government borrowing and economic growth.
b) At what point does borrowing become harmful for countries like Islandia and Caribana? Explain.
3. Evaluate whether or not the government of Caribana should take on more debt to build its economy after the hurricane? Provide real-world examples.
4. Select two Caribbean countries and one non-Caribbean country that usually
borrow(s) from the IMF. Present the most recent data about how much they currentlyowe the IMF. Comment on each country’s ability to repay the loans over the years.
5. Discuss the role of international financial institutions (e.g., IMF, World Bank) inhelping Caribbean nations manage their debt. Provide real-world example
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