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Government debt is typically measured as the gross debt of the general government sector that is in the form of liabilities that are debt instruments. [2]: 207 A debt instrument is a financial claim that requires payment of interest and/or principal by the debtor to the creditor in the future.
Because the government spends more money than it collects in tax revenue, lawmakers need to periodically tackle the issue -- a politically difficult task, as many are reluctant to vote for more debt.
The European debt crisis is a crisis affecting several eurozone countries since the end of 2009. [7] [8] Member states affected by this crisis were unable to repay their government debt or to bail out indebted financial institutions without the assistance of third-parties (namely the International Monetary Fund, European Commission, and the European Central Bank).
Rising government debt levels have seemingly always been in the headlines. In recent years, U.S. debt levels have become political, with one side of the aisle often refusing to raise the debt limit...
In 1979, Barro defined the Ricardian equivalence theorem as follows: "... shifts between debt and tax finance for a given amount of public expenditure would have no first-order effect on the real interest rate, volume of private investment, etc." [5] Barro noted that "the Ricardian equivalence proposition is presented in Ricardo". However ...
4. Speculation. As investors try to earn a profit, their speculation on a currency’s value could cause the exchange rate to change. Suppose investors believe a nation’s money is overvalued.
Economist Laura D'Andrea Tyson wrote in June 2012: "By itself an increase in the deficit, either in the form of an increase in government spending or a reduction in taxes, causes an increase in demand. But how this affects output, employment and growth depends on what happens to interest rates.
The United States debt ceiling is a legislative limit that determines how much debt the Treasury Department may incur. [23] It was introduced in 1917, when Congress voted to give Treasury the right to issue bonds for financing America participating in World War I, [24] rather than issuing them for individual projects, as had been the case in the past.