What is a government debt?

Government debt, also known as public debt, is any money or loan owed by any level of government. This includes both debt to internal creditors and foreign banks or other countries. Understanding government debt is a good way to understand the economy of the nation in a global context; Countries with a higher level of government debt are often threatened by serious economic problems if there is a recession or fiscal emergencies.

Many people do not realize that government debt is indirectly the responsibility of citizens. In fact, the public pays for most debts incurred through taxes or by purchasing government securities and bonds. Government bond is generally considered an excellent investment due to favorable interest rates and low risks. By purchasing bonds, the public funds the repayment of government debt, whether national or municipalities.

There are many reasons why the government could have a debt. Some of the oldest examples of the Government debt dates back to the abundant wars between aNglia and France in the Middle Ages. War is often the reason for increased government debt, but simple expansion and provision of citizens are even more common reasons. Like the family, she could accept a housing loan for the idea that they would continue to maintain their income, and eventually repay the debt, so the governments also take over the debt to provide and expand their services and economics.

whether or not is a good idea, it is a big debate between economists. In classical Keynesian theory, a certain amount of debt is acceptable if used to stimulate the national economy. Other theories suggest that countries should not grow faster than allow its resources and councils against government debt.

Many agrees that there is a considerable danger if it becomes public debhelming. In critical situations, the government failed to debt or refused to take over payments after the overthrow of the government. The fall of the global financial crisis in the roCE 2008 brought problems of government debt to significant relief, especially in the country of Greece. A huge level of public debt combined with an incompetitive market, a declining gross domestic product (GDP) and the inability to degrade their currency this once prosperous nation on the brink of bankruptcy.

The amount of public debt to the country is usually measured according to the debt ratio to GDP. When establishing the euro area, the European Union said that the country could not become a member of the zone if it has retained a public debt below 60% of its GDP. According to 2009 statistics, Greece maintained the debt ratio to GDP of 113.4%, the United States had 52.9%and Mosambique had the least public debt with a ratio of 3.7%.

It is important to realize that regional and local governments are also able to induce public debt. Although generally on a smaller scale, this type of public debt may still have a large ripple to the national economy. If the city or state government cannot repay its debt, perhaps the national government will have to save them, which leads to other governmentm to the national level expenditure.