Direction: Read the given passage carefully to answer the following questions. Each question will have five alternatives as its answer. Choose the correct option as your answer. 

Global debt reached an unprecedented milestone in the second quarter of 2023, hitting a staggering $307 trillion, as reported by the Institute of International Finance (IIF). This marked a remarkable increase of approximately $100 trillion in the past decade. Notably, global debt as a percentage of gross domestic product (GDP) had steadily declined for seven consecutive quarters but has now rebounded to 336%. Global debt encompasses the borrowings of governments, private businesses, and individuals. Governments often resort to borrowing to cover various expenditures, including interest payments on past debts, while the private sector primarily borrows to fuel investments. What's intriguing is the recent reversal in the trend of decreasing global debt as a share of GDP. The IIF attributes this shift to rising price inflation, which has enabled governments to effectively erode their debt in local currencies. This practice, known as "inflating away from debt," occurs when central banks use the newly created currency to buy government bonds, which, in turn, inflates prices, indirectly taxing the broader economy to alleviate government debt.

The increase in global debt levels is not inherently __________, especially when accompanied by a rise in savings funnelled into investments. The recent growth in debt, totalling $10 trillion in the first half of 2023, has occurred against a backdrop of increasing interest rates, which was expected to dampen loan demand. Nevertheless, the gradual rise in debt levels is a common occurrence as the money supply tends to expand annually. Concerns typically arise about the sustainability of debt, particularly in the case of government debt. Politically motivated borrowing for populist initiatives can lead to rapidly escalating debt burdens. As central banks raise interest rates to combat inflation, servicing such debts becomes more challenging. Some believe that inflation or default may be the only escape routes for governments with heavy debt burdens. The IIF report also raises the alarm about the international financial infrastructure's inability to handle unsustainable domestic debt levels. Furthermore, rapidly increasing private debt often sparks worries about its sustainability, as it can be associated with unsustainable economic booms that may eventually lead to financial crises if not supported by real savings.