Part 6/8:
Second, austerity measures—either slashing spending or raising taxes—could be implemented to curtail deficits. Although austerity could stabilize debt levels, it is fraught with political challenges and risks adversely impacting the broader economy.
Debt monetization, the third strategy, involves the central bank purchasing government debt to keep borrowing costs low. While effective in the short term, it can lead to inflation, which poses its own set of challenges.