Debt as of GDP as of 2012 Japan Greece 237 160 Italy 126 1

Debt as % of GDP as of 2012 Japan Greece 237% 160% . Italy 126% 107% 85% USA Canada Germany Mexico 80% 45% 53% 21 - China -) 190% BUS 208 Dr Joe Mayer Please note that the latest estimates put China\'s debt way above 230% of GDP Once you have reviewed this information, answer the following questions: The United States has a deficit of $17.6 Trillion. Explain how this debt: o Might impact the GDP o Might impact the overall economy o Might impact your generation\'s opportunities

Solution

US debt is rising year after year, now it is expected to rise more due to fall in corporate and income taxes:

Impact on GDP: initially, GDP will increase due to rise in debt as government expenditure will see significant rise. But if government is not able to gather sufficient resources in long run, then debt would affect GDP negatively. Government would have to resort to borrowing for paying old debts.

Impact on overall economy: in short run, economic activities would be intense and widespread, so economy would perform well but expenditure by the government is made in non-productive activities, the government would have to borrow from market. it will increase rate of interest in market. such rise in interest rate would crowd out private investment and would affect economy adversely.

Impact on generation opportunities: debt becomes burden for future generation if debt is not spent on productive ways.