National Debt and Deficit? Please explain the two!?
Answer:
Deficit is how short we are this year from the budget (let's just say you have $100, and $150 in expenses, you have a $50 deficit). Debt is the accrued deficits of years past, so your $50 deficit and last year's $50 deficit means you now have $100 in debt. I put this in very small personal terms to make the example easy to see, but you get the drift on a larger scale.
National debt is the total amount of money that a country owes.
National deficit is the amount by which a country overspends in a particular fiscal year.
eg,
if a country overspends by $100 million a year for 10 years, (ignoring interest and repayment)
the national deficit is $100 million for each year. The national debt is $100 million after the 1st year, $200 million after the 2nd year, $300 million after the 3rd year...
Let's start with the deficit. Every year, the government collects taxes and spends the money on whatever it thinks it should spend money on. If it spends more than it collects, it's called a deficit. Normally, deficit is financed with borrowing.
National debt... Well, this one depends on whom you ask. Some people would say national debt is the total amount the government owes, both to domestic and international creditors. Others would say that national debt is the total amount a country (including the govermnent and the private sector) owes to foreign creditors.
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