Does National Debt Matter? -Analysis Based on The Economic Theories

ABC Research Alert

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Field Value
 
Title Does National Debt Matter? -Analysis Based on The Economic Theories
 
Creator Han , Alex
 
Subject National Debt
Inflation
Economic theories on debt
 
Description The national debt has been increasing at a higher percentage than the GDP of the United States. Since the 2008 Global Financial Crisis, national increased dramatically since the country borrowed to finance its expenditures. Moreover, with the onset of the Covid-19 pandemic, national debt increased to 105% of the GDP. There have been worries about whether the national debt is a matter of concern, and many theories have been developed to explain national debt. The classical economists advocated for a     balanced budget where taxes finance government expenditure. Keynes argued that governments should borrow to finance their spending to avoid a decrease in demand. The pecking order theory argued that when businesses use all their retained earnings, they should prefer debts to equity to finance their    expenditures. Trade-off theory advocated for financing through debt because it is cheaper. Debt     payments of a company are deductible through tax, and less risk is involved when taking debt than    equity. Finally, the neoclassical economists assumed that government debt has a one-time maturity and pays the current interest rate. Using the concepts of these theories, it is clear that national debt should not be a matter of concern because it is cheaper to pay debt than equity and debt benefits a country in the long run.
 
Publisher Asian Business Consortium
 
Date 2021-11-26
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
 
Format application/pdf
 
Identifier https://abc.us.org/ojs/index.php/abcra/article/view/582
10.18034/abcra.v9i3.582
 
Source ABC Research Alert; Vol. 9 No. 3 (2021): September-December Issue; 100-103
2413-5224
10.18034/abcra.v9i3
 
Language eng
 
Relation https://abc.us.org/ojs/index.php/abcra/article/view/582/1088
 
Rights Copyright (c) 2021 Alex Han
http://creativecommons.org/licenses/by-nc/4.0
 

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