General Debt Flashcards
What is national debt?
Debt owed by the governments of countries, sometimes known as government, federal or public debt.
How is national debt expressed?
As a % of the countries GDP.
Give an example of a high national debt and a low national debt, and in what year?
In 2021:
Japan - 238%
Brunei - 3%
What does the UK’s national debt vary between usually?
About 100-110%
Why does Japan have such a high national debt?
Ageing population, harder to tax. Increased money needed for pensions, healthcare, social security. Lack of economic productivity.
Why is comparing a country’s national debt not the best way?
- GDP difficult to accurately measure, eg informal sector and services. Eg Burundi, 95% of people estimated to work in informal sector, such as small-scale agricultural jobs.
- HICs have large assets so can borrow more easily and lower costs, making interest payments easier to manage.
- A country’s national debt is not actually paid back with GDP, but with tax revenues.
Give an example of a country’s economy being misjudged.
China’s economy being overestimated by as much as $1 trillion.
What causes national debt?
- Economic recession
- Inflation
- War and conflict
- Over borrowing
Why has debt increased in the USA?
- Tax cuts introduced by George Bush
- Increase healthcare costs
- Cost of Iraq and Afghanistan Wars
Outline the problems of national debt.
Very high national debt slows down economies, and may require higher rates of taxation. High interest payments can eventually cause a sovereign debt crisis, where countries are unable to service their debts.
What are some positives of national debt?
+ Invests into development, can benefit countries economy down the line.
+ Allows country to have facilities quicker, eg healthcare.
+ Keep people happy eg potholes filled.
