Class 12 Macro Economics - Chapter Government Budget and Economy NCERT Solutions | Does public debt impose a burden? Explai
Does public debt impose a burden? Explain.
Government debt or public debt refers to the amount or money that a central government owes. This amount may be borrowings of the government from banks, public financial institutions and from other external and internal sources. Public debt definitely imposes a burden on the economy as a whole, which is described through the following points.
1. Adverse effect on productivity and investment: A government may impose taxes or get money printed to repay the debt. This however reduces the peoples ability to work, save and invest, thus hampering the development of a country.
2. Burden on younger generations: The government transfers the burden of reduced consumption on future generations. Higher government borrowings in the present leads to higher taxes levied in future in order to repay the past obligations. The government imposes taxes on the younger generations, lowering their consumption, savings and investments. Hence, higher public debt has negative effect on the welfare of the younger generations.
3. Lowers the private investment: The government attracts more investment by raising rates of interests on bonds and securities. As a result, a major part of savings of citizens goes in the hands of the government, thus crowding out private investments.
4. Leads to the drain of National wealth: The wealth of the country is drained out at the time of repaying loans taken from foreign countries and institutions.
More Questions From Class 12 Macro Economics - Chapter Government Budget and Economy
- Q:-
Explain the relation between government deficit and government debt.
- Q:-
Give the relationship between the revenue deficit and the fiscal deficit.
- Q:-
Discuss the issue of deficit reduction.
- Q:-
Are fiscal deficits inflationary?
- Q:-
‘The fiscal deficit gives the borrowing requirement of the government’. Elucidate.
- Q:-
We suppose that C = 70 + 0.70Y D, I = 90, G = 100, T = 0.10Y (a) Find the equilibrium income. (b) What are tax revenues at equilibrium income? Does the government have a balanced budget?
- Q:-
In the above question, calculate the effect on output of a 10 per cent increase in transfers, and a 10 per cent increase in lump-sum taxes. Compare the effects of the two.
- Q:-
Explain why the tax multiplier is smaller in absolute value than the government expenditure multiplier.
- Q:-
Explain why public goods must be provided by the government.
- Q:-
What do you understand by G.S.T? How good is the system of G.S.T as compared to the old tax system? State its categories.
Popular Questions of Class 12 Macro Economics
- Q:-
What is marginal propensity to consume? How is it related to marginal propensity to save?
- Q:-
Differentiate between balance of trade and current account balance.
- Q:-
What are the four factors of production and what are the remunerations to each of these called?
- Q:-
What is a barter system? What are its drawbacks?
- Q:-
What is the difference between microeconomics and macroeconomics?
- Q:-
What is the difference between ex ante investment and ex post investment?
- Q:-
What are official reserve transactions? Explain their importance in the balance of payments.
- Q:-
Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.
- Q:-
What are the main functions of money? How does money overcome the shortcomings of a barter system?
- Q:-
What are the important features of a capitalist economy?
Recently Viewed Questions of Class 12 Macro Economics
- Q:-
Differentiate between devaluation and depreciation.
- Q:-
Suppose it takes 1.25 yen to buy a rupee, and the price level in Japan is 3 and the price level in India is 1.2. Calculate the real exchange rate between India and Japan (the price of Japanese goods in terms of Indian goods). (Hint: First find out the nominal exchange rate as a price of yen in rupees).
- Q:-
If inflation is higher in country A than in Country B, and the exchange rate between the two countries is fixed, what is likely to happen to the trade balance between the two countries?
- Q:-
Explain the automatic mechanism by which BoP equilibrium was achieved under the gold standard.
- Q:-
What is ‘effective demand’? How will you derive the autonomous expenditure multiplier when price of final goods and the rate of interest are given?
- Q:-
Should a current account deficit be a cause for alarm? Explain.
- Q:-
Discuss some of the exchange rate arrangements that countries have entered into to bring about stability in their external accounts.
- Q:-
What do you understand by ‘parametric shift of a line’? How does a line shift when its (i) slope decreases, and (ii) its intercept increases?
- Q:-
What are official reserve transactions? Explain their importance in the balance of payments.
- Q:-
Distinguish between the nominal exchange rate and the real exchange rate. If you were to decide whether to buy domestic goods or foreign goods, which rate would be more relevant? Explain.
- All Chapters Of Class 12 Macro Economics
- All Subjects Of Class 12