Individual debt differs from government debt
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1. List three ways in which individual debt differs from government debt.
2. If all of the government's debt were internal, would financing that debt make the nation poorer?
3. How can a government that isn't running a deficit still get itself into financial trouble?
4. Why is debt service an important measure of whether debt is a problem?
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This discusses the difference between individual debt and government debt and other related concepts.
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1. List three ways in which individual debt differs from government debt.
The public borrows from banks in order to acquire credit money to spend on investment or consumption. In contrast, the government borrows from the public only as needed to recapture its deficit spending, all of which is base money.
The government borrows in base money while the private sector borrows in credit money.
Government borrowing has no net effect on the amount of base ...
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