What is the difference between public debt and external debt? For example, the level of...

Question:

What is the difference between public debt and external debt? For example, the level of debt-to-GDP is 104% in US. Is it a public or external debt?

Debt:

Debt is a capital building instrument for a person or organization, which is rendered by the credit unions, banks, and other financial institutes. Debt promotes its borrowers to obtain commodities and services.

Answer and Explanation:

Public debt vs External debt:

Public debt is a general debt which is obtained by the government of any country, and external debts are those debts which a country owed to the foreign country and institutions.

When any government pays the public debts, the money revolves in the economy, but in case of external debts, the money goes out of the country.

External debts need to be paid in foreign currency or in the home currency; generally, the international lender requires the other currency as currency protection. On the other side, public debts are usually paid in home currency.

For instance, if debt to GDP is 104%, it is reflecting the excess of external debts.


Learn more about this topic:

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Long-Term Debt: Definition, Cost & Formula

from Financial Accounting: Help and Review

Chapter 8 / Lesson 7
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