What would happen if the government erased all debts that it accrued?


What would happen if the government erased all debts that it accrued?


Debt is money borrowed by one party from another.Here the borrowing party gets permission to borrow money under the condition that it must be paid back at a later date, usually with interest.Many corporations and individuals use debt as a method of making large purchases that they could not afford under normal circumstances.

Answer and Explanation:

If the government erased all debts that it accrued then the government would crash the national and international economy, it would take generations for foreign investment to come back to the United States. The economies around the world would go into massive depressions as well. The great depression affected economies around the world. The entire economy works off government debt, because government debt is everyone else's wealth. Eliminate the debt and you eliminate the economic energy of the economy.Stock market will collapse, Investors understand the size of the problem, so will immediately line up to sell stocks. Probably devastating the stock market and causing further giant losses to individual investors and financial institutions.

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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