what is the debt ceiling

Expert Solution

Debt Ceiling it is a monetary upper limit of any economy that a goverment to borrow loans. It is measured as percentage of GDP. It was created during World War I under the Second Liberty Bond Act of 1917 and is also known as the "debt limit" or "statutory debt limit". It is the maximum amount of money the States can borrow by issuing bonds.

The fedral goverment does not earn enough money through income tax and other revenue to cover the cost of running the country like education, sanitation, infrastructure, social secruities etc. As a result the goverment faces the situation of budget deficit. For covering the situation of budget deficit the govermenent started to selling the nation in the terms of issuing bonds and selling secruities for both short and long term and at what rate of interest instead of taking loans through banks. In the case of selling and issuing secruities and bonds, the goverment perform as lender not a borrower.

Rahul Sunny answered 2 years ago

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