Question

• Briefly describe and quantify the level of debt of the company, industry, country or region that you chose. You must use statistical data and factual information to address this question.
• You must integrate at least two financial or economic theories learned in class to explain how debt:
  • Positively impacts a company or industry through increased profits possible because of leveraging, expansion because of increased investment levels..., or a country or region through increased loan term growth because of investment, additional social programs,...
  • Negatively impacts a company or industry through over-indebtedness costs, increased risk of bankruptcy..., or a country or region as it increases the risk of default, increases borrowing costs,.
  • Describe whether you believe that the company, industry, country or region that you chose should increase or decrease its debt level. Be specific and support your assertions.
  • Must be at least 450 words.

Answer 1

Debt of a nation (US)

If we consider the debt of a nation or public debt of a country. The government borrowings is mainly consider as public debt. Government borrowing is made of money and for the repayment for the borrowing after a certain period of time. The economists such as Adam Smith, A.G. Hart, J.S. Mill,David Hume, J.B. Say, A.P. Lerner, D. Ricardo, and Malthus have worked on public debt. But Smith and Ricardo criticised the public debt in their prspective, borrowing can be spent recklessly because of being an easy income; so that causes degrading effects in the functioning of economic life of society.

US Debt

positive effects include

Spending for new infrastructure projects will increase and it backs the exporters. the expensive projects such borrowing to open additional floor as performed by the company to produce benefits in the future whatsoever expensive projects will open additional storefronts as performed by the company can produce benefits in the future.The expensive projects such borrowing lead to open additional storefronts as performed by the firm can generate advantages in the future.

negative effects

The citizens of a country to loose their benefits, including land, assets,natural resources and government services.If a nation is borrowing more money, it must sell more of its bonds and the risk may increase that cause repayment ability. Therefore the currency exchange rates will totally fall with those additional borrowings. The credit rating of a nation also will drop in extreme cases and also the currency has an stimulus effect.