Public Debt, Public finance Video Lecture | Public Finance - B Com

Ans. Public debt refers to the total amount of money that a government owes to individuals, organizations, and other countries. It is the accumulation of all outstanding financial obligations incurred by the government through borrowing or issuing bonds to finance its expenses.

Ans. Public debt and public finance are related but distinct concepts. Public finance encompasses the management of a government's revenue, expenditure, and debt. It involves the study of how governments raise funds through taxes, fees, and borrowing and how they allocate these funds to meet various public needs. Public debt is a component of public finance and refers specifically to the amount of money owed by the government.

Ans. High public debt can have several implications for an economy. Firstly, it can lead to higher interest payments, as governments may need to borrow more to service the debt. This can strain government budgets, leading to reduced spending on public services and infrastructure. Secondly, high levels of public debt can crowd out private investment by increasing interest rates, making it more expensive for businesses and individuals to borrow. Lastly, it can undermine investor confidence in the country's ability to repay its debt, leading to higher borrowing costs and potential economic instability.

Ans. Governments employ various strategies to manage their public debt. One common approach is debt consolidation, where multiple smaller debts are refinanced into a single larger debt with more favorable terms. Governments also use debt restructuring, which involves negotiating with creditors to modify the terms of existing debts, such as extending the repayment period or reducing interest rates. Additionally, governments may engage in debt issuance, where they sell bonds or securities to investors to raise funds. The management of public debt also involves closely monitoring debt-to-GDP ratios and fiscal policies to ensure sustainable borrowing levels.

Ans. While high levels of public debt can have negative consequences, moderate levels of public debt can be beneficial for an economy. Public debt can be used to finance investments in infrastructure, education, healthcare, and other public goods, which can stimulate economic growth and improve long-term productivity. Additionally, during periods of economic downturn, governments can use deficit spending and increased public debt to implement fiscal stimulus measures, such as tax cuts and increased government spending, to boost aggregate demand and support economic recovery. However, it is crucial for governments to ensure that public debt remains sustainable and does not exceed the country's ability to generate future income and repay the debt.