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Types of National Debt by Hicks:

Hicks had classified national debt into three main types or categories:

(1) Deadweight Debt.

(2) Passive Debt.

(3) Active Debt.

(1) Deadweight Debt:

Definition and Example:

Deadweight debt is one which is not covered by any real assets.

In the words of Hicks:

Deadweight debt is that which is incurred in consequence of expenditures which in no way increase the productive power of the community, yielding neither money revenue nor a future flow or utilities.”

For example, the loan raised during war period is a deadweight debt because for such debts no real assets exist to balance them.

(2) Passive Debt:

Sometimes government raises loans for spending on such projects which neither yield money income nor help in raising the productivity of the country. They simply provide enjoyments to the citizens such as public parks, museums, public buildings etc.

(3) Active Debt:

Active debt is one which is spent on those projects that directly help in yielding money income and increasing the productive power of the community.

Types of National Debt by J.L. Hanson:

J.L. Hanson has classified national debt into four main classes:

(1) Reproductive Debt.

(2) Deadweight Debt.

(3) Unfunded Debt.

(4) Funded Debt.

(1) Reproductive Debt:

Definition and Example:

When a debt has assets to balance it, it is called reproductive debt.

For example, if a state barrows money for spending it on the construction of canals, railways, factories, etc., it is then able to repay the loan from these self liquidating projects.

(2) Deadweight Debt:

A debt which is not covered by any real assets is called deadweight debt.

For example, debt invested on war or prevention of war is a deadweight debt.

(4) Funded Debt:

Funded debts are long term debts. The government continues paying the annual interest on such loans but makes no promise to pay the principal sum to the lender on any specified date.

The examples of funded debts are long term government stocks, war loans, etc.

(4) Floating or Unfunded Debt:

Floating or unfunded debt comprises of short term loans. It is payable to the lender with interest on or before a fixed date.