Burden of the national debt, Managerial Economics

Burden of the national debt

The extent of the burden on a nation of public debt, depends in the first place on whether it is an external or an internal debt.  The burden of the national debt to the community can be approximated by the cost of serving it.  The cost of servicing the public debt can be calculated:

i.   Per head of the population, or

ii.  As a percentage of government revenue, or

iii.  As a percentage of the national income.

Whichever method used, the National debt shall have the following burden on society:

  • If higher taxation is required to service a debt which might have disincentive effects resulting in a lower level of output, then this is a burden.
  • If the debt is held by foreigners, goods will need to be exported to pay the interest and possible repayment of capital. This part of the debt will involve a great burden.
Posted Date: 11/30/2012 4:16:50 AM | Location : United States

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