What is the Debt-to-GDP Ratio and Why Does it Matter?

Has the United States overleveraged themselves right into the danger zone?

The debt-to-GDP ratio is a measure of a country's debt burden relative to its overall economic output. It is calculated by dividing the total amount of a country's debt by its gross domestic product (GDP), which is the total value of all goods and services produced in a given year.

A high debt-to-GDP ratio can be a cause for concern because it indicates that a country may have difficulty paying off its debt. This can lead to higher borrowing costs, as lenders may demand higher interest rates to compensate for the increased risk of default. A high debt-to-GDP ratio can also put pressure on a country's currency, as investors may become less confident in the ability of the government to pay back its debt and demand a higher return on their investment.