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Finance & Accounting
Pages 3 (753 words)
Author’s Name: Instructor’s Name: Course Name: Due Date: Budget deficit, Public Debt and the Risks of Voluminous Debt Quite simply, a government running under a budget deficit operates/expends in excess of its total revenue collections. As a result, the extra expenditures are financed by the government borrowings through the issuance of government debt, either internally or to external investors.
It is an obvious fact that the current disorder of public finances of industrial countries, particularly the United States and those in the Euro-zone, is a dilemma with a strength-supping dimension that only compares to the aftermath of WWII. Notwithstanding the austerity measures, economic stabilization that resulted into fairly rapid reduction of debt/GDP ratios after WWII seems rather unlikely. With the aging populations significantly adding to the fiscal burden of the high public debt induced by the 1930s Great Recession and exacerbated by the subsequent crises, the United States and Euro-countries are staring at a challenge that will not disappear any soon. The consequential impact of public debt build ups can well be understood from the perspective of economic sovereign debt crises as well as the subsequent exit strategies sought after to salvage a nation(s) from complete collapse as was the case with the defunct USSR. The bulging government debt has been a remarkable trend over the past decades, possibly due to the ever expanding size of governments. ...
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