Impact of National Debt and Budget Deficits

Question 1

What three things are impacted by national debt and budget deficits?

Answer 1

interest rates
financial crowding out
future generations

Question 2

Interest rates

Answer 2

budget deficits result in increased government borrowing, increasing the demand for money and thus its price, increasing the interest rate

Question 3

Financial crowding out

Answer 3

increase borrowing = higher interest rates decrease private sector investment - too expensive

Question 4

Future generations

Answer 4

increase borrowing - increase national debt, as well as its interest rate, increasing the national debt even more
- future generations receive high taxes and low expenditure = lower SOL