What problems can result from the presence of a large national debt?
Answer:
If we are speaking of a large enough national debt that seems like it will last for awhile 5+ years(medium to long run), the presence of a large enough national debt generates uncertainty, which is a variable that is negatively related investment.
The presence of a large national debt can be visualized by an outward shift of the IS curve in the ISLM model. This, in the short run, spurs interest rates and aggregate demand, but in the medium run, the expectations built upon the uncertainty will shift the IS curve inward past the original point of equilibrium, resulting in lower aggregate demand.
Outside the model, this means that less people will invest in the country and thus will slow or stunt economic growth.
Basically it seems to be the same on an individual level.If I owe tons and tons of money to lets say my neighbor, that neighbor becomes what stresses me out.That neighbor becomes a person who could put a lien on my house if I don't pay them back.You see where I am headed? It makes us DEPENDENT,WEAK and VULNERAVBLE.
Where is Bill Clinton when you need him?
Well, the largest is that future GDP has to go to the funding of the interest + principle in the future.
It really depends on who holds that debt and how the government goes about refinancing it. Also you want to look at debt in relation to GDP to see how large you're really talking about.
The answers post by the user, for information only, FunQA.com does not guarantee the right.
More Questions and Answers:
More Questions and Answers: