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National Debt

Definition

National debt refers to the total amount of money that a government owes to its creditors as a result of accumulated budget deficits over time. It represents the overall financial obligations of a country.

Analogy

Think of national debt as your student loan balance. It's the sum of all the money you borrowed from lenders and need to repay with interest over time.

Related terms

Budget Deficits: Occur when government spending exceeds revenue collected during a specific period, leading to an increase in national debt.

Treasury Bonds: Securities issued by governments as a way to borrow money from individuals or institutions with fixed interest rates and maturity dates.

Debt-to-GDP Ratio: A measure comparing the size of a country's national debt relative to its gross domestic product (GDP), indicating its ability to repay debts.

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Practice Questions (6)

How is the national debt different from a budget deficit?
What is one possible effect of a high national debt on the economy?
What is one potential danger of having a high national debt?
What is the difference between the national debt and the debt-to-GDP ratio?
What is one potential consequence of high national debt for a country's citizens?
What is the potential impact of persistent budget surpluses on national debt?