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In: Finance

If the public debt is a debt that we owe to ourselves, then there are obviously...

If the public debt is a debt that we owe to ourselves, then there are obviously no problems connected with such a debt. Critically evaluate. What are some of the real and potential problems with a large public debt?

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Expert Solution

Public debt is amount of debt a country owes to outside lenders. It is also called sovereign debt . The government issues bonds and the outsiders invest in it for long period of time or short period of time. These are considered highly secured form of debt .

To say that public debt is the debt we owe to ourself is wrong because public debt is the amount of debt that a country owes to the outside lenders . Funds through these types of debt are generated by government to fuel the growth of its economy with the help of credit.

Public debt is the accumulation of annual budget deficits. When the public debt start to grow higher, it is a matter of the concern for long-term growth and sustainability of an economy because debts are often associated with redemption so if more debt will be there more redemptions will also be there. That will slow down the growth of the country posing solvency risk and defaulting on its debt for longer periods.

jeff jeffy answered 2 years ago
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