Do high amounts of public debt hurt economic growth?


Do high amounts of public debt hurt economic growth?

Pubic Debt

Public debt is the amount that a country owns from the outside sources. Public debt includes sourcing from individual, business and government. The public debt is used to fulfill the money required for economic growth.

Answer and Explanation:

The effects of high debt depend on economic growth and effective government. Countries like China which have a high growth rate and have an effective government will easily overcome the problem of high debt. The effective government helps to convert high debt into economic growth in their respective countries.

The countries like Greece and Italy had low economic growth and had an ineffective government. They fail to convert the public debt into economic growth because the money they borrow is used in sops. Therefore the countries have to face economic instability because of high debt.

Learn more about this topic:

Long-Term Debt: Definition, Cost & Formula

from Financial Accounting: Help and Review

Chapter 8 / Lesson 7

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