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National Debt

Definition

The national debt refers to the total amount of money that a country owes to its creditors, both domestically and internationally. It is the accumulation of past government borrowing and represents the financial obligations of the government.

Analogy

Imagine you are a student who keeps borrowing money from your friends to buy snacks and drinks during lunchtime. Over time, you accumulate a large debt that you need to pay off. This debt becomes a burden for you, just like the national debt becomes a burden for future politicians.

Related terms

Deficit: The deficit refers to the amount by which spending exceeds revenue in a given year. It contributes to the national debt because if there is a deficit, the government needs to borrow money to cover its expenses.

Fiscal Responsibility: Fiscal responsibility means making wise decisions regarding government spending and taxation in order to maintain sustainable public finances.

Interest Payments: Interest payments are the amounts paid by the government on its outstanding debts. These payments can become substantial as the national debt grows, putting pressure on future politicians to allocate funds for interest rather than other priorities.