Which one of the following is a good statistic to evaluate where an economy stands in the financial cycle?
- A. Tax/GDP Ratio
- B. Fiscal Deficit/GDP Ratio
- C. Household Consumption/GDP Ratio
- D. Credit/GDP Ratio ✓
Correct Answer: D. Credit/GDP Ratio
Explanation
The Credit-to-GDP ratio is widely used by central banks and financial institutions as a primary indicator to assess systemic risk and track the boom-and-bust phases of the financial cycle.
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