National Debt and Income Determination:

What is Federal Budget:

"The federal budget is the annual statement of the expenditures and revenues of the government". Until the Great Depression years of the 1930's, the federal budget had no clear purpose but to finance the unplanned activities of the federal government. Continue reading.

What is National Debt:

The annual statement of expenditures and tax revenues of a government during a particular period is called federal budget. The federal budget finances, the activities of the government and is used to achieve higher level of national income and employment without inflation in the country. Continue reading.

Classification/Types/Categories of National Debt:

Hicks has grouped national debt into three main types/categories: (i) Deadweight Debt,   (ii) Passive Debt and (iii) Active Debt. Continue reading.

Short Term Loans:

There are periods when a government is not able to meet its expenditure from the tax receipts. It then takes recourse to borrowing. The loans which are payable within a year are termed as short term loans. Continue reading.

Long Term Loans:

There are periods when a government is not able to meet its expenditure from the tax receipts. It then takes recourse to borrowing. If the government is in need of large funds and the short term loans are not suitable and adequate, then it takes recourse to long term loans. Continue reading.

Methods of State Borrowing:

State can raise loans or borrowing in different forms. It may obtain loans from (i) people within the country, (ii) from other states and specialized international credit institutions, (iii) by issue of inconvertible paper currency. Continue reading.

Methods of Paying Public Debt:

If a government wishes to escape from the burden of the debt, then there are two ways open to it. It may (i) repudiate its debt, (ii) repay them. If the public authority decides to repudiate the debt, then it loses the confidence of the people living in the country and of the foreign governments. Continue reading.

Burden of National Debt:

The classical economists were of the view that every government should balance its own budget. Balancing of the annual budget was considered to be a great virtue by them. If at any time, the expenditure of the state exceeded its income and the deficit was met by borrowing from within the country or from outside, it was considered to be a sign of bankruptcy and downfall of the state. Continue reading.

National Debt and Economic Stability:

Whenever national loans are increased, they can lead to economic instability in the country. In fact there is nothing good or bad with the debts; It all depends upon the wisdom of the administration. Continue reading.