what is the debt ceiling

Solutions

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 1 year ago

Next > < Previous

Related Solutions

What is the debt ceiling? When and why was it created? Discuss the pros and cons...

What is the debt ceiling? When and why was it created? Discuss the pros and cons for raising the debt ceiling.

Consider the debt ceiling of the United States and the consequences of a default by the...

Consider the debt ceiling of the United States and the consequences of a default by the United States on its national debt. Some commentators and politicians during the 2013 negotiations over raising the debt ceiling commented that failure to raise the debt ceiling would not have that dramatic an impact on world financial markets. Comment on the consequences of a default by the US on its debt.

What is a price ceiling and what are the consequences of creating a price ceiling that...

What is a price ceiling and what are the consequences of creating a price ceiling that is below the equilibrium price? What is a price floor and what are the consequences of creating a price floor that is above the equilibrium price?

What is a price ceiling? Give and describe an example of a price ceiling in real...

What is a price ceiling? Give and describe an example of a price ceiling in real world applications.

What would happen if the government set a ceiling on the price of gas? What could...

What would happen if the government set a ceiling on the price of gas? What could change in supply and demand, would you end up better off since the price is low, or would you end up without any gas because there is a shortage? Would it be feasible to think that doing so would lead to black markets?

One of the consequences of a government imposed rent control ceiling with the ceiling set below...

One of the consequences of a government imposed rent control ceiling with the ceiling set below the equilibrium rental price is: Select one: a. a surplus of apartments. b. a shortage of apartments. c. decreased search activity of people who want to rent apartments. d. an increase in maintenance and additional amenities like swimming pools and free cable

What are the effects if the interest rate ceiling is set above the equilibrium rate of...

What are the effects if the interest rate ceiling is set above the equilibrium rate of interest? (Think back to our earlier discussion of rent control and other price controls.)

1. What is a ‘price ceiling,’ exactly? 2. What is ‘pure’ rent control, in theory? 3....

1. What is a ‘price ceiling,’ exactly? 2. What is ‘pure’ rent control, in theory? 3. What are the GOALS of a ‘pure’ rent control law, or ordinance? I mean, why would a city government PASS a ‘pure’ rent control law in the first place? What are the goals? 4. A. In theory, why does the implementation of ‘pure’ rent control fail to achieve those goals? What “goes wrong,” in theory? B. In theory, what happens to the Supply Curve...

Does a proce ceiling increase or decrease the number of transactions in a market? Why? What...

Does a proce ceiling increase or decrease the number of transactions in a market? Why? What about a price floor?

Does a price ceiling change the equilibrium price? What would be the impact of imposing a...

Does a price ceiling change the equilibrium price? What would be the impact of imposing a price floor below the equilibrium price? How does a price ceiling set below the equilibrium level affect quantity demanded and quantity supplied? Does a price floor attempt to make a price higher or lower? How does a price floor set above the equilibrium level affect quantity demanded and quantity supplied?

Subjects