Question

In: Economics

Calculate the federal debt and year-over-year percentage growth. Explain the economic impact.

Calculate the federal debt and year-over-year percentage growth. Explain the economic impact.

Solutions

Expert Solution

--> Federal debt as a percentage of gdp in the United States averaged 62.86 percent from 1940 until 2019, reaching an all time high of 118.90 percent in 1946 and a record low of 31.80 percent in 1981. Debt to gdp ratio in the usa in 2019 as estimated at 106 percent which is equal to around 23 trillion dollars. Debt was 65 percentage in 1990's was increased to 91 percentage in 2010 which then further increased to 106 percentage in 2019.

---> economic impacts of large debt include : - As the federal debt mounts, the government will spend more of its budget on interest costs, increasingly crowding out public investments ; Federal borrowing competes for funds in the nation’s capital markets, thereby raising interest rates and crowding out new investment in business equipment and structures ; High levels of debt not only makes a fiscal crisis more likely, it also reduces our government’s flexibility to respond to future emergencies, unanticipated challenges, wars, or recessions ; America’s high debt jeopardizes the safety net and the most vulnerable in our society. If our government does not have the resources and stability of a sustainable budget, those essential programs, and the individuals who need them most, are put in jeopardy.


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