Clearly, there are significant limitations on the ability of governments to borrow, as the consequences of...

Clearly, there are significant limitations on the ability of governments to borrow, as the consequences of excessive government debt are economically undesirable.’Discuss this statement, and assess the policy options that are available if the level of government debt is thought to be too high.

Expert Solution

There are significant limitation on the ability of government to borrow because the government debt has also to be kept in control, because if there is excess government debt, that will make the economy very vulnerable to any kind of credit squeeze in the Global Markets and it would be economically undesirable.

If the government debt are too high that can force government to adopt very high rate of taxes into the economy and that will lead to an economic unstability as well as the devaluation of the currency would also be resultant in such scenario, when there is excess government debt.

Government should always maintain its fiscal and trade deficit in check, because In the long run the expansion of its government that can cause substantial pressure on the overall economy, and it can be value the repayment capability of the government when there is a Credit crunch in the whole global economy and such economies are bound to collapse.

So there should be a proper management of books of accounts of government on the part of debt financing because that can lead to currency devaluation and and instability in economy.

jeff jeffy answered 1 year ago

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