Question

. What is the debt to GDP ratio for the U.S. public debt for 2018? Is the U.S. national debt beneficial or detrimental to the U.S. economy? Provide and explain three reasons to support your answer. Be specific.

Answer 1

Answer- Debt to gdp ratio if a country indicates how much goods and seevices they economy is able to produce and thus analysis whether government can pay off it’s debt or not. A developed country should maintain debt to gdp ratio at around 60% and it is 40% for a developing country. The United states debt equals to 105% of it’s GDP. It means that the total GDP of the us economy is not sufficient to pay of all of it’s debts.

It seen that the debt to gdp ratio of IS is quite high it can be detrimental for the economy if the same maintained for a long period of time. Following are the three reasons of why such high ratio is detrimental :-

• If such high ratio is maintained the US economy can fall into a debt trap as it’s goods and services produced would not able to cover up the total debts, leaving the country in avivious circle pf debt.

• Such high ratio prevents the country’s growth as the country would not have enough funds to plan and execute it’s growth strategies. High ratios can also lead to inflation which can be bad for a country’s economy as a whole.

• A country with high debt to gdp ratio for quite a long time shall be considered as a poorly managed country and will find it difficult to get out of the debt and grow the economy. Maintaining high ratio for a long time would result in high interest along with the debt payment. And if the economy is not able to pay off it’s debts then might have to liquidate it’s assets to cover up the principal and the interest amount.