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Public Debt: Absolute and Relative sizes of the public debt

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Please help answer the following questions.

1) How do economists distinguish between the absolute and relative sizes of the public debt? Why is the distinction important?
2) How does an internally held public debt differ from an externally held public debt?

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Solution Summary

This posting helps with an international trade problem. It discusses how economist distinguish between the absolute and relative sizes of public debt. It discusses the importance of this distinction and how an internally held public debt differs from an externally held one. The explanation is given in 304 words.

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1) How do economists distinguish between the absolute and relative sizes of the public debt? Why is the distinction important?

Answer)

The "public debt" or the "national debt", is the amount of money owed by the Government to holders of debt instruments issued by Government.

There are two ways of measuring the public debt:
(i) measure its absolute dollar size;
(ii) measure its relative size as a percentage of GDP.

The distinction is ...

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