Am I correct to say one implication of misclassifying a liability as a current or long-term could be that the organization debt would be overstated.

No, because all liabilities, both current and long-term, are debts. So there's no overstatement of the amount of debt.

Give it another try. And concentrate on the sub-categories of current and long-term. Yes, it does mean that one of the sub-categories is overstated and one is understated, but they're looking for the implications of that.