Explanation:
Prospect theory posits that individuals evaluate outcomes as gains or losses relative to a reference point, overweight small probabilities, and exhibit loss aversion (losses loom larger than gains).
In the context of public debt management, 'Debt Sustainability Analysis' typically examines:
A.Whether the projected path of the debt-to-GDP ratio remains stable or declines under plausible assumptions about growth, interest rates and primary balances
Explanation:
Debt sustainability analysis assesses whether a country’s debt trajectory is consistent with intertemporal solvency, usually by examining the evolution of the debt-to-GDP ratio under baseline and stress scenarios.
Explanation:
Under flexible exchange rates, the currency appreciates or depreciates automatically in response to balance of payments pressures, helping to restore equilibrium.
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